LONDON Small mining
companies will look at strategic divestitures of assets in an
attempt to raise funds in 2013 and beyond, according to KPMG
LLP partner and head of global metals and mining in corporate
finance Rama Ayman.
Ayman, who was named to the
position earlier this month, said that junior miners in
particular will require "creative solutions" to secure the
funding they need as traditional sources of financing dry
"It will take longer to
negotiate deals and it will be more difficult and challenging
as buyers are more selective. Also, the number of buyers will
not be as high as previously," he told AMM sister
publication Metal Bulletin. "The buyers will know that
there is less competition and will take longer to assess the
value of a project and with due diligence."
Nevertheless, merger and
acquisition (M&A) activity is likely to increase as mining
companies look less at spinning off assets and more at selling
off non-core parts of their business.
According to Ayman, these "big
buyers" comprise four distinct groups: large Chinese trading
and metals companies, large trading houses based elsewhere in
Asia and in Switzerland, sovereign wealth funds and captive
funds developed by wealthy individuals or groups.
"I see these four groups as
being the main buyers in 2013 and 2014. Of course, traditional
buyers will be there as wellthey will always look to
acquire interesting new assets," he said.
But while Ayman expects M&A
in the mining arena to be "very active" in 2013, there will be
some challenges, particularly when it comes to agreeing on
final sales prices. "I think 2013 will be a very active year
for M&A, but I also think certain deals will be harder to
close," he said. "The bid/ask spread is going to increase
because sellers might think recovery is around the corner, but
buyers might be more cautious and expect lower demand and lower
commodities prices for the medium term."
Bridging that gap between bid
and ask prices will be key to negotiations in 2013 and 2014, he
A version of this article was first
published by AMM sister publication Metal