Deals: Make or break. Picture: BLOOMBERG/GEORGE FREY

A few big and several modest acquisitions have lightened the Southern African mining scene in the past three years, but an almost equal number of deals has collapsed.

Analysts often complain that mining companies tend to make acquisitions at the top of the cycle and sell at the bottom, resulting in huge losses for shareholders.

Some of the deals concluded at the top of the market were clearly based on a too-sunny view of future commodities prices. But at the bottom of the cycle, deals fail for a variety of reasons. These include buyers’ inability to raise finance because banks are risk averse and share prices are too low to make shares a viable currency.

It can be impossible to agree on price because sellers overvalue their assets.

Distressed assets may look like an opportunity, but after a due diligence it can be obvious they require more investment than weak markets justify.

Two of the biggest local deal-makers have been Sibanye Gold and Northam Platinum.

Sibanye Gold has spent R8bn-R10bn on buying Rustenburg Platinum and Aquarius Platinum. Northam recently bought resources adjoining its Zondereinde mine for R1bn and the Everest mine and concentrator for R450m. Another large deal that has been controversial isGupta family-controlled Tegeta Resources’ purchase of Optimum coal mine, which was in business rescue, from Glencore for R2.15bn.

Other deals have been relatively small, including Bushveld Minerals’ US$17.2m for 78.8% of Vametco vanadium mine and plant from Evraz Group, and Pan African Resources’ R148m purchase of Uitkomst colliery and R547m for shares in its BEE holding company.

Harmony bought joint-venture partner Newcrest’s share in Hidden Valley mine in Papua New Guinea for a mere $1m, but will have to invest $180m more. It has already impaired its stake in Hidden Valley by R2.5bn.

Other transactions have been more embarrassing for the sellers. Rio Tinto sold its stake in Riversdale anthracite colliery to Acacia Mining for about A$5.5m and its stake in Zululand anthracite colliery to Menar Holding for an undisclosed sum. Taking into account the $50m Rio Tinto realised for Riversdale’s Mozambican assets sold to International Coal Ventures, it made a significant loss on the $3.9bn it paid for all the Riversdale assets in 2011.

Another painful loss was taken by Exxaro, which sold its interest in the Mayoko iron ore project for $2m to a Congolese company, Sapro, after taking a R5.86bn impairment on it.

One of the high-profile sellers that has so far had only limited success is Anglo American. It has sold its niobium and phosphate operations in Brazil for $1.5bn to China Molybdenum.

But more than 18 months after announcing it would sell its coal mines and exit Kumba Iron Ore, it has not managed to do so.

Union platinum mine, held by Anglo subsidiary Anglo Platinum, has been up for sale for almost four years (CEO Chris Griffith recently expressed optimism that Union would be sold by the end of this year).

Another asset on the block is Barrick Gold’s 64% stake in African gold miner Acacia Mining, worth about R23.5bn. Though rumours of the sale emerged only a few months ago, it is probably too big to sell easily. Sibanye Gold looked at it but did not pursue it, CEO Neal Froneman confirmed recently.

Also in the gold sector, Randgold Resources walked away from an option to buy AngloGold Ashanti’s Obuasi mine in Ghana, which is currently overrun by illegal miners. It said the mine did not meet its investment criteria.

Chinese buyers, who had deep pockets and were keenly searching for African resources a few years ago, have walked away on several occasions.

Central Rand Gold was courted by four Chinese buyers but failed to secure any binding offers. Eastplats’ planned $225m sale to Chinese group Hebei Zhongbo Platinum failed when one of Hebei’s major shareholders opposed it, ostensibly because it missed a deadline.

Shandong Qixing Iron Tower walked away from an agreement to buy Stonewall, the owner of old gold mines around Pilgrim’s Rest, for $140m.

Stonewall said Shandong’s reasons were unclear, but possibly related to weaker gold prices.

Other deals that were never concluded were Sibanye’s purchase of up to 51% of Waterberg Coal and Coal of Africa’s $91m offer for Universal Coal.

Prospects of a deal create share-price excitement, but Central Rand offers a cautionary lesson. Its shares soared from 130c to 500c when potential Chinese buyers emerged.

They are now 35c.