Commodity Online With the rapid onset of the worldwide recession in late 2008, marked by sharp drops in commodity prices that continued till 2009 marked notable implications on base metals, where the global mergers and acquisitions activities came almost to a halt.
The global meltdown did hit economies, but the turmoil was also witnessed in the corporate level, who went extremely cautious on the global mergers and acquisitions. In a latest research report by Metals Economics Group (MEG), the volume of large acquisitions in base metal industry recorded a dip of a whopping 66% from its levels in 2008, the third consecutive annual decrease in acquisitions spending since the historical high in 2006.
The figures indicated that acquisitions in base metals was recorded at $ 71,109 mn in 2006, which fell to $32,229 mn in 2008 and sank further to $6817 mn in 2009, which is the lowest levels since 2004, when the acquisitions in base metals were valued at $2244 mn.
However, the fall in acquisitions in gold sector was lower than that of base metals, as the gold sector acquisitions fell from its peak of $23,376 mn to $8,910 mn in 2008 and $7,264 mn in 2009.
Although in nominal terms the 2009 total was still the fifth-highest annual total in the past ten years, the steep year-on-year drop from 2008 is slightly more than the 65% decline from 2001 to 2002, at the bottom of the cycle.
Data analyzed from MEG's Base Metals and Gold Acquisitions services shows a 79% plunge in base metals acquisitions spending from just over $32 billion in 2008 to just under $7 billion in 2009, the largest year-on-year decline in base metals spending since 1990. In contrast, 2009 gold acquisitions decreased by a relatively mild 18%, from almost $9 billion in 2008 to just over $7 billion.
Of the total 31 base metals transactions considered in 2009, Australia-Pacific was by far the richest regional target in 2009 in terms of in-situ value acquired, with seven transactions totaling almost $113 billion in in-situ value-38% of the US$290,278 million total value acquired. Africa was second with five deals totaling almost $63 billion in value, with its 22% share to total the acquisitions.
Meanwhile, of the 43 gold acquisitions that happened during 2009, Africa, with 28% of the US$ 95,152 million in-situ total value acquired, had six transactions containing $26,642 million of resources in the ground. Latin America held the share of 18%, while Asia and Australia-Pacific constituted together about 33% of the total gold acquisitions during the period.
The slump in the acquisition is significant especially, when the rise in the early years of 2000-2010 recorded quite sluggish with acquisitions growing at a very thin rate. At the initial two years, base metals acquisitions remained at $2.8 billion and rose to $5.5 billion by 2001. Similarly, acquisitions in gold rose from $1.8 billion to $8.7 billion by 2001. Although, the total acquisitions fell sharply in 2002 from $14 billion to $5 billion, it maintained a slow but steady growth till 2004, when the total acquisitions were recorded at $6.5 billion.
According to the data provided by the analyst firm, the years 2005, 2006 and 2007 witnessed some of the remarkable acquisitions in base metals as well as in gold. The slump in the pace of acquisition began after 2007 and became critical post 2008, under the effect of global meltdown.