Mining mergers set to continue into next year

Consolidation among AIM-listed mining companies will continue next year, according to Ernst & Young (E&Y), following a rapid recovery in stock values in the sector during 2009.

Mining stocks on the junior market nearly tripled in value this year, according to an index of shares monitored by E&Y. Its Mining Eye index gained 173 per cent over the year, reversing the declines of 2008.

This was the largest annual rise in the index, which tracks the performance of the top 20 AIM miners, since it was set up in 2004. According to E&Y, 2009 was a year of distress followed by recovery for the AIM mining sector. The first half of the year saw firms cutting costs, selling assets, and delisting from the market as companies struggled in the difficult conditions. But by mid-year, metals prices began to turn around, boosting investor confidence in the sector. Equity fundraising recovered, with a total of £809m raised in the sector, and takeover activity stepped up.

E&Y’s Tim Williams said: “Some of AIM’s largest mining companies became targets for the major mining companies, while others became acquirers themselves. We expect the consolidation story to continue in 2010.”