Pitfalls and Pipelines - Philippine Indigenous Peoples Links

Chapter 1.2: Financial Innovations and the Extractive Industries
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& Young’s own data paints a far from optimistic picture of
innovative strategies being used to attract substantial funding.
Importantly, Ernst & Young itself recognized that
“[P]erhaps the most profound effect of the global financial
crisis on the metals and mining industry is that the world
has lost as much as two years of growth in the supply of
scarce resources. The deferral of projects pending financing
will lead to a construction bubble that will compete with
other lagging fiscal stimulus for resources.”
Now, that did seem to be a reasonable prediction of a crisis
that the global minerals industry continues to confront, particularly
with regard to China—as I will shortly elaborate.
Ernst & Young told us in early 2010 that “equity will play a
greater role in the next wave of growth, with the Initial Public
Offering (IPO) market starting to recover in 2010.” But what
has been the evidence of this so far?
Although Ernst & Young’s own “Mining Eye index” (a
weekly tracker of the share values of the top 20 AIM-listed
mining companies) gained 173 percent in 2009, as of March
2011 the index overall was still 40 percent down on the alltime
high achieved a year before. 24
By the end of 2010, Ernst & Young estimated that the
volume of completed deals in the mining and metals sector
during the first half of that year was up 20 percent (to 544
transactions) on the same period in 2009, with a 46 percent
increase in their overall value (to just over $40 billion).
Ernst & Young also predicted that”[t]he pace of deal activity
will continue to accelerate,” driven by China and the other
Asian economies, envisaging that big, globally-diversified
mining companies would “pursue bolt-on acquisitions” for up
to another year, especially ones from North America which
had “dominated the bigger value deals in the first half of
2010.”
The report continues: “While resource security continues
to be the driving force behind increased deal activity in the