3 Reasons Why the M&A Boom is Here - Ken Hoffman, Bloomberg
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THE PRIVATE EQUITY/PUIBLIC MINER DILEMMA // BLOOMBERG INDUSTRIES METALS & MINING THE M&A BOOM IS HERE MINES & MONEY – HONG KONG MARCH// 27 // 2014 Kenneth Hoffman, CFA Global Head Metals and Mining Research Bloomberg Industries
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Transcript of 3 Reasons Why the M&A Boom is Here - Ken Hoffman, Bloomberg
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BLOOMBERG INDUSTRIES METALS & MINING
THE M&A BOOM IS HEREMINES & MONEY – HONG KONGMARCH// 27 // 2014
Kenneth Hoffman, CFA Global Head Metals and Mining Research Bloomberg Industries
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CONFLUENCE OF INDUSTRY EVENTS MAY LEAD TO A BOOM IN MINING M&A
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THE BOOM IS HERE
Mining Companies High Debt Forces “Asset Rebalance”
PE Sees Underserved
Market, “Dry Powder Of Up To $30 bn”
Valuations Plunge—Boards
Can Agree To Deals And PE
Sees Opportunity
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DEBT LEVELS RISING
MANY METALS IN “BEAR MARKET”
EQUITY MARKETS NOT RECEPTIVE
DEBT MARKETS NOT RECEPTIVE
BUYERS FOR ASSETS APPEARING FROM ALL OVER
3WHY MINERS HAVE COME TO PUT OUT “FOR SALE” SIGNS
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Public Mining Companies Have Seen Miserable
Performance Over the Past 3 Years
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Historic Relationships Have Broken Down 5
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The Decline in Shares Has been Related to the Uptick
in trading of Metals
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Not Just Gold…
China alone Has launched8 Metals Exchanges since 1993
Is this the big bang moment for metal markets?
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8Now Metal Prices Have Declined
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9This has led to the Firing of a Herd of CEO’s
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10Time is Short as Miners Run out of Cash
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11Debt Levels Are Nearing Historical Highs
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12Barrick’s Additional Offering Wasn’t Received Well
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13New CEO’s Have All Put Up For Sale Signs
“There are assets in the portfolio that we're questioning. We're working with the team. There's some turnaround work, but we will sell assets over the next three or four years.”
- Mark Cutifani, CEO Anglo American, 12/12/2013, Analyst & Investor Meeting
“We continue to actively pursue opportunities to optimize our existing portfolio including the potential sale of assets…which are non -core, high cost, short life and low free cash flow generating”
- Sam Walsh, CEO Rio Tinto, 02/12/13, Investor Seminar
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UP TO $30 BILLION IN “DRY POWDER” MAY BE AVAILABLE FOR ASSETS
DON’T FORGET CHINA THEY ARE BACK BUYING SELECT ASSETS
CORPORATES IN “STRONGER POSITIONS” READY TO MAKE THEIR MOVE
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LAST YEAR WE TALKED PE --THEY DELIVERED
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15During The 2013 HK Mines & Money We Spoke Of PE
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16The Money Now Raised PE will Want to Invest
Bloomberg’s Team Researches & Tracks Private Equity ---- PE<GO>
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17Potentially $25-$30 bn Of Capital Ready
15 Major New Mining PE Funds in 2013 /2014
More Than $12.5 Bnraised in last 24 months
Vs. 1.6Bn Deals Done across all PE in Mining
Perhaps $25-$30 Bn In Potential Capital Could Come Into Mining
Use Bloomberg’s PE<GO> Function to Track Private Equity Activity
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18PE Firms Will Need to Invest Soon. Investors Demand Returns
“Waterton’s project evaluations team has identified a nd evaluated over 350 projects worldwide, ranging from $10mm millio n to $3.6 billion. “ - Waterton Global May 22 2013, Press Release
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19Biggest Potential Deals Failed to Materialise
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20Other Funds Made Strategic, Small Investments
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21What About China?
Foreign Chinese/HK Acquisitions (Completed)
Completed Since ‘05
# Deals $ Value Largest Deal
Gold 36 2.5Bn Taung Gold -$670M
Base Metals 70 7.5Bn 12% Stake Rio Tinto $14Bn
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* Bloomberg M&A Database, Not including Las Bambas bids
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Target Commodity Value TV/R&R
Gold One International
Gold $38.67M 0.4
Focus Minerals Gold $2 0.11
Galabyte $63.33M
Palbora Mining Copper $143.3M
Elemental Minerals
Potash $180 -
Stonewall Mining Gold $141M
Some Large Deals Pending, Especially Copper & Gold Miners
$2.06 Billion of Cross Border Chinese Acquisitions Announced in 2013
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* Bloomberg M&A Database, Not including Las Bambas bids
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Target Commodity Value TV/R&R
Gold One International
Gold $399.8M 0.07
Focus Minerals Gold $237.5M 0.14
Galabyte Pty Gold $63.33M -
Palabora Mining Copper $143.3M 0.03
Elemental Minerals
Potash $180 -
Stonewall Mining Gold $141M 0.21
Some Large Deals Pending, Especially Copper & Gold Miners
$2.06 Billion of Cross Border Chinese Acquisitions Announced in 2013
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24The Bottom May Have Been Seen In 4Q13
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Acquired Deal Price EV/R&R Date
Red Back Mining $6.7 bn 0.410 08/2010
Anglo American Sur $5.4 bn 0.415 11/2011
Inmet Mining
Augusta Bid
$4.2 bn
$0.60-$0.75
0.340
0.029-0.036
11/2012
01/2014
Andean Res. $3.2 bn *1.95 09/2010
Current Copper Company EV/ Reserve
0.042
Las Bambas (est in Press) $ 5.9 Bn 0.169
Assuming $3 bn for start-up
All-In $8.9 bn 0.254
25Las Bambas Deal May Be Completed Soon
* Augusta far from production--Andean only M&I/ Inferred Resources
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Deal Multiples in Base Metals
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27Only Lead Multiples are not at Historic lows
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Deal Multiples in Base Metals
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Last 3 years Are Seeing Falling Multiples
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30Precious Metals: Prices Are Falling=More Deals
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31Large Cap Miners Have Seen Valuation Declines Small Miners Have Collapsed
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32Last 2 years: Deal Prices Have Lessened More Deals Can Get Done
TV
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WILLING MINING COMPANY SELLERS
PRIVATE EQUITY, CHINA, AND SELECT CORPORATE BUYERS LOOKING FOR BARGAINS
A CONFLUENCE OF A DROP IN MINING EV/RESERVE PRICES AND THE PRICE AT WHICH SELLERS AND BUYERS CAN COME TOGETHER
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CONCLUSION—HERE COMES THE BOOM
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Thank you for listening
Ken Hoffman, CFA Sector Head Metal and Mining [email protected]+1-609-279--5754Princeton NJ
Oliver Nugent, Metals and Mining Analyst [email protected]+44-20-3525-8425 London
