LONDON (Reuters) - Mining executives are still nursing the bruises of a bidding frenzy that peaked with BHP Billiton's (BLT.L) failed move for Rio Tinto in 2007 (RIO.L), but with cash piles running high and valuations edging close to post-crisis lows, deals are back.
This time, the key word is "opportunistic," as miners eye a medium- or long-term picture of growth for Asia's commodity-hungry economies that appears increasingly out of sync with tumbling shares and falling metals prices.
With markets volatile and the medium-term economic outlook uncertain, talk of seizing opportunities has been mainly that -- talk -- but deals are gaining pace and more could be on the cards, as under-pressure juniors and stakes in key projects begin to look increasingly attractive.
"Stock prices have come down and if you have a big cash pile, what are you going to do? Either you pay it out (to shareholders) or you buy something," analyst Andrei Kroupnik at Collins Stewart said.
"It is a trade-off, it is about manageable acquisitions -- you don't want to take on too much debt to buy these assets, given what happened in 2008 and the current uncertainty. But I'd say (deals) are definitely likely."
Mega-deals may be off the agenda but analysts, bankers and company sources say more cautious purchases are back on.
Kazakh miner ENRC ENRC.L became the latest to highlight the potential for "opportunistic" deals in its presentation to analysts visiting its Kazakhstan operations earlier this week, the latest indication of a stronger tone from the sector.
Commodity trader and miner Glencore (GLEN.L), which listed in May primarily to seize opportunities in just such markets, said last month it saw a wealth of options as the price of listed assets drops while private firms become less optimistic.
It is in the process of buying the shares in Australia's No.2 nickel producer Minara MRE.AX that it does not already own and has said it is interested in a controlling stake in South African miner Optimum OPTJ.J. Sources familiar with the sector say it is also looking at other South African coal assets.
Russian precious metals firm Polymetal PMTL.MM, which said on Friday it wanted a premium London listing, cited acquisition currency as a reason for the move and said it saw opportunities thrown up by market volatility.
Major diversified miners are cautious, but even they have softened the tone.
"The language has changed. Where they were talking only small, synergistic (deals), that has been carefully abandoned," one veteran industry banker said.
Rio Tinto (RIO.L) told analysts last week it had learnt the lessons of the 2007 deal to buy aluminum giant Alcan, a $38 billion acquisition approved while commodity markets were strong but which left it saddled with debt as markets unraveled.
"We have also got lots of M&A possibilities in the present state of the equity markets," Chief Financial Officer Guy Elliott said. "We are going to be very judicious about them."
Key to the attraction of deals is current valuation levels that are edging closer to lows hit during the 2008 crisis, making potential targets cheap for cashed-up miners.
According to Thomson Reuters Datastream, even diversified miners like Rio or Anglo American (AAL.L) are trading at 12-month forward P/E ratios that are virtually half their average over the last five years.
In 2010, according to Ernst & Young data, there were 1,123 deals worth a total of $113.7 billion, and the first half of 2011 has seen deals worth $96 billion, though that is expected to slow in the second half after a volatile summer.
M&A TARGETS WANTED
Bankers say boards are running the slide rule over assets across the spectrum, with a focus on assets geared to the Asian economies and in greater demand, like coking coal and copper.
"They are going through a rocky patch now, but in the medium or long term, the outlook is fairly robust. Shareholders may not like it now, but they may like it a few years later," another banker close to the industry said. "There is one problem with these opportunities -- there aren't many of them."
Large, diversified miners like BHP, Rio, Anglo and Xstrata XTA.L typically look only at low-cost, long-life so-called Tier 1 assets in their chosen commodities. Those are few and far between and there is already evidence of miners looking beyond their ideal geographies.
There are also very few mid-size miners that would be appetizing to the large-caps and the remaining targets are being snapped up. China's Minmetals (1208.HK), thwarted in its bid for copper miner Equinox earlier this year, agreed on Friday to buy Anvil Mining AVM.TO for $1.28 billion.
Bankers say they also have to contend with increasing shareholder and board nervousness with few willing to commit.
And, in the capital-intensive mining sector, deals will always have to stack up against organic growth.
"When we added up all announcements (the top 40 miners) had made about capital expenditure and their pipeline, it came to $300 billion of projects to build," said Jason Burkitt, UK mining leader at PricewaterhouseCoopers in London.
"If you think about the amount of operating cash flow, and how many years it will take to generate the cash to build those projects ... Of course there will be acquisitions as well, but that is quite a burden to spend."
Additional reporting by Scott Barber; Editing by Jon Loades-Carter