While 2012 saw the return of mega-deal activity in Canada, B.C.'s mining sector didn't participate in the renewed merger and acquisition rush as much as was hoped.
The total value of the top 25 biggest mining M&A deals fell to $12.2 billion in 2012, down from $18.3 billion in 2011, based on Business in Vancouver research.
While B.C. saw some significant billion-dollar deals at the start of 2012, as the year progressed, deal activity dipped. This was in large part because companies and investors became increasingly cautious as eurozone debt issues resurfaced in the spring and the world waited for the outcomes of a series of pivotal events, including the U.S. presidential election; the transition of China's national government; and then a deal to address America's fiscal cliff.
That turmoil hampered Canada's junior mining companies, which faced growing challenges to obtain capital in the public markets. While the TSX managed to recover much of its value last year, the TSX-Venture Exchange continued its multi-year decline that began at the end of 2010. As of the end of February 2012, the Venture Exchange had lost 60% of its value from its peak in 2007 prior to the global financial crisis.
Those global headwinds dug into overall deal activity in Canada. According to PwC Canada's capital flash report, overall M&A activity fell 9.6%, with 2,811 deals announced last year worth $210 billion.
The bulk of the deal value was contained within 49 mega-deals worth a total $123 billion, although many of the largest and most notable were oil and gas related, including China National Offshore Oil Company's $15.1 billion acquisition of Calgary's Nexen Inc., and Singapore's Petronas' $5.5 billion deal for Progress Energy Resources.
B.C.'s largest mining deal ended up being Eldorado Gold's $2.5 billion purchase of London's European Goldfields, followed by Poland's KGHM's acquisition of Quadra FNX Mining, which closed March 2012.
For the year, the mining sector's share of Canadian M&A deals shrank to 11% from 19% in 2011.
Whether deal activity stems its multi-year decline in B.C. will be dependent on whether Asian firms will continue to invest in assets owned by B.C. companies. Expectations of commodity prices, Chinese demand and economic growth will remain key factors.
