China won’t be alone for long, Elliott

Ernst & Young mining leader Mike Elliott told MINING DAILY that while China's dominance of Australian mining investment was made easier by a lack of competition, it will soon have rivals in the market.

China’s recent dominance of Australia’s mining mergers and acquisitions is because they have been the only buyer in the market, Ernst & Young global mining and metals leader for Oceania Mike Elliott told MINING DAILY.

“In the last few years leading up to 2009 the Chinese dealt in smaller deals, and last year they were able to launch very much larger transactions,” he said.

“There was virtually no competition.”

Elliott was talking after yesterday’s release of an Ernst & Young report that revealed China accounted for around two thirds of Australian mining’s US$10.6 billion in merger and acquisition deals.

The report found that the top 35 mining deals in Australia were made with foreign investments, a marked change from 2008 when three of the top four deals were local.

According to Elliott, the international trend is likely to continue for they foreseeable future, but China will no longer stand alone as the only buyer.

“The continued economic development of not only China, but also India and other developing countries is only going to increase the demand for those resources,” Elliott said.

“I think what we will see different is that in 2010 and 2011 there will be a lot more competition, so China won’t necessarily be as successful in all of the assets that they are interested in.

“Whereas in 2009 they were the only ones holding the chequebook.”

Total global mining investment for 2009 was around US$60 billion, down from US$126.9 billion in 2008.

Elliott said that investment totals are likely to soon rise again due to a combination of demand and price recovery.

“The interesting part about 2009 was that we actually had a record number of deals, but the value of those deals was much, much lower,” he said.

“So the deal interest is out there, but as we see asset prices recovering we will see that flow through into the total value of deals.”

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