Mining Sector to Rebound, Says E&Y

3 June 2009 (Last Updated June 3rd, 2009 18:30)

The mining sector is likely to experience a rebound from the struggles felt in 2008 but a strong possibility of a severe supply gap remains, a leading Ernst & Young (E&Y) mining analyst said at the World Mining Congress in London. E&Y UK head of mining and metals Lee Downh

The mining sector is likely to experience a rebound from the struggles felt in 2008 but a strong possibility of a severe supply gap remains, a leading Ernst & Young (E&Y) mining analyst said at the World Mining Congress in London.

E&Y UK head of mining and metals Lee Downham said that firms are restructuring to tackle the challenging market conditions.

“Increasingly there appears to be light at the end of the tunnel for the mining and metals sector; fear for survival has largely eased, giving way to a desire to control costs and become ‘fitter’ for a challenging period of global recovery,” Downham said.

Between 2006 and 2008 many projects were financed though debt rather than equity, which left the sector constrained when prices fell.

The trend going forward will be the need to secure equity to fund future transactions, said Downham.

“Strong drivers for M&A still exist so deals will need to become more innovative, with a greater number financed with paper and that will result in fewer contested transactions with a greater focus on synergies,” he added.