PERTH (miningweekly.com) – Merger and acquisition (M&A) activity in the mining sector was likely to remain lethargic for the remainder of this year and into 2014, professional services firm PwC global mining leader John Gravelle said this week.

In its new 'Mining Deals' report, PwC revealed that M&A activity in the sector had fallen by some 31% during the first half of this year on the previous corresponding period, as miners lost confidence owing to a combination of write-downs, market uncertainty and falling commodity prices.

Further the value of M&A deals had declined by some 74% to $20.6-billion.

Gravelle pointed out that there had also been a shift among the major mining companies over recent months, with the majors switching from being buyers to sellers.

During the six months under review, mining giant Rio Tinto had unloaded an 80% stake in its Northparkes copper mine, in Australia, and was looking to sell a 59% interest in its Iron Ore Company, in Canada.

“Traditional takeovers of entire companies are taking a back seat to joint ventures and spin-offs. Expect more of these nontraditional and creative deals to round out M&A activity during the second half of 2013,” said Gravelle.

Meanwhile, he pointed out that mining CEOs were re-evaluating which assets were core and would likely raise proceeds to reduce debt, improve shareholder returns and fund capital expenditures.

“They will need to concentrate on the projects they have and operate them with a focus on the bottom line,” he added.

PwC’s report pointed out that gold and copper accounted for nearly half of the M&A transactions during 2012 and 2013, by both value and volume.

For the first half of the year, gold was the leader by value, representing some 36% of transactions taking place between January and June this year, compared with the 26% it made up during the first half of last year.

Copper, in turn, accounted for 12% of deals by value, down from the 23% a year earlier.

“Gold and copper continue to be the most active buyers and sellers in the first half of 2013, a trend that is expected to continue as depressed prices create opportunities for those who can afford to buy,” said Gravelle.

By geography, Russia and Kazakhstan took the top two spots from Canada and China for the most M&A activity during the first six months of the year, with Russia accounting for just over a quarter of the deals, followed by Kazakhstan at 19% and the US at 11%.