A worker walks near conveyer belts loaded with iron ore at the Fortescue Solomon iron ore mine located in the Valley of the Kings, around 400 km (248 miles) south of Port Hedland in the Pilbara region of Western Australia December 2, 2013.
A worker walks near conveyer belts loaded with iron ore at the Fortescue Solomon iron ore mine located in the Valley of the Kings. Reuters/David Gray

Mergers and acquisitions, or M&A, have always been regarded as a solution for ailing junior mining companies in need of a financial boost. However, it can also be beneficial for the company doing the acquisition as the buyout can help add value to a company's portfolio. There are many attractive buyout targets in different parts of the world, such as White Mountain Titanium Corporation (OTCQB: WMTM), a Chilean titanium and rutile miner operating the Cerro Blanco Project, deemed to become one of the largest primary rutile deposits in the world with an estimated rutile output of 112 million tonnes. But in Australia, M&A activity in the mining industry has slowed down to a standstill, punctuated by a dismal 10-year low performance last year.

According to Philip Whitchelo of Intralinks, the slack caused by the metals and mining industry in M&A activity is now being picked up by other industries. "That [mining] sector has really flipped in terms of importance," he said. "What happened is that Australian M&A has done a fantastic job of rebalancing away from the metals and mining sector and toward other sectors."

But recent M&A activity in the Australian mining scene, particularly companies mining heavy mineral sand ore deposits, has given a tiny bit of hope to Aussie miners. In April, mineral sands miner Strandline Resources executed a Binding Heads of Agreement to acquire a 100 percent interest in a subsidiary of Jacana Minerals, a Tanzanian mineral sands explorer. After the completion of the acquisition, Strandline will hold the dominant mineral sands exploration position in Tanzania, in addition to being more well-funded.

The acquisition will also secure one of the last unexplored pieces of the East African mineral sands producing corridor, which boasts of over 10 major operating mineral sands mines and deposits. Mineral sand deposits are major sources of metals like titanium, zirconium, thorium, tungsten and rare earth elements. Precious metals and gemstones like diamond, sapphire and garnet can also be mined in these deposits.

Similarly, Iluka Resources, the highest producer of titanium dioxide products, has returned with an offer for Irish miner Kenmare Resources 10 months after it first proposed more than $800 million in June 2014 for the latter's acquisition. The offer substantially lowered last month as Iluka Resources valued Kenmare only at $363 million. Kenmare shareholders would receive 0.016 shares in Iluka for every Kenmare share they own.

In spite of the lower offer, Kenmare Resources looks set for the buyout. "The board of Kenmare has reviewed the proposal carefully and has considered Kenmare's financial position, prevailing market conditions, and the terms of the debt amendment," the company said in a statement. "Having taken independent advice and subject to its fiduciary duties, the board of Kenmare believes that it is in Kenmare's shareholders' and other stakeholders' interests for Kenmare to continue to work with Iluka towards satisfaction of the pre-conditions to Iluka's proposal."

Paul Murphy, EY Australia and Asia Pacific mining and metals transaction leader, said that there are a few positive signs that the M&A activity is going to recover soon. "Australia had the highest volume of mining and metals initial public offerings (IPO) globally in 2014, with seven listings raising $76 million, helped by the buoyancy of the broader IPO market in Australia," he said. "However, the lack of risk capital for junior explorers is having a significant impact on available funds for exploration, potentially setting up supply shortages for the next decade."

Contact the writer: a.lu@ibtimes.com.au