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* Deal value, volume down sharply against last year
* Excluding Glencore Xstrata, completed deals down a third
By Sonali Paul and Clara Ferreira-Marques
MELBOURNE/LONDON, Sept 12 (Reuters) - Bankers trying to movea mountain of mining assets for sale are being tested to thelimit by unreliable buyers, stubborn sellers and a widening gapbetween them that has already caused billions of dollars' worthof deals to be shelved.
Global mining firms are under pressure from investors toslim down after boom-year expansion ended badly for many ofthem. However, with demand from China's steel mills holding upthe iron ore price, big miners are unwilling to sell assetscheap - unwanted or no - while potential buyers want a bargain.
The result has been a sharp dip in the value of dealsannounced in the metals and mining sector so far this year -just over $64 billion, roughly half the value of announced dealsat the same time last year, according to Thomson Reuters data.The number of deals is down by more than a quarter.
"There is some pressure to put assets into the market, butthose that have been coming down the pipe so far have been moredifficult for buyers to get comfortable with," Julian Vickers,co-head of the global natural resources group at Barclays said.
Rio Tinto , for example, has been trying tosell more than $30 billion worth of assets from diamonds to ironore to slash costs, cut debt and focus on their best assets.
So far, miners have succeeded in offloading copper, gold andnickel mines, most either in developed countries or incommodities where questions over supply linger. However sales ofaluminium, diamonds, and coal assets, with fewer specialisedbuyers and in some cases a weak market, have been scrapped forlack of offers, or disappointingly low ones.
The result for bankers who have long profited from theirclose relationships with mega miners is that they havesacrificed manpower for auctions that have dragged on for over ayear. Many are now taking on deals they know will be tough orimpossible to seal, just to preserve client relationships.
"People are throwing themselves at fairly difficult mandatesfor nothing," said Robert Dunlop, global head of naturalresources at Macquarie Capital.
If not for the $46 billion takeover of Xstrata bycommodities trader Glencore announced last year andcompleted in May, the value of deals completed in 2013 wouldhave dropped over a third to $50 billion.
WIDENING SPREAD
For bankers advising potential buyers, the environment isjust as tough. Not only do they face the challenge of siftingserious bidders from bargain hunters, from those who may beultimately too wary to seal any deal, they are also negotiatingin an environment where the price of iron ore has held up above$130 a tonne - meaning the biggest sellers aren't desperate.
"(Major miners) are not forced sellers, they are trying torealise value," said Jason Burkitt, UK mining leader at PwC.
Traditional private equity funds dipping their toe in thewater are moving forward only very slowly, while industry buyersare finding it tough to raise equity funding from investors waryafter $75 billion of writedowns across the mining sector in thepast two years. Even Chinese buyers - the go-to solution in manyauctions - have been cautious.
Ernst & Young forecasts the standoff to continue for atleast another two years.
"It's not about availability of assets or the availabilityof capital, it's about bridging the gap on price expectations,"said Mike Elliott, global mining and metals leader at Ernst &Young.
He suggested that bankers would have to start working extralayers into deals - such as contingency payments tied tocommodity price moves - in order to get things moving.
SUFFERING FOR RIO
This year has been most painful for bankers close to worldno.3 miner Rio Tinto, which over the summer pulled the sale ofits diamonds and Pacific Aluminium units - valued on its booksat $1.3 billion and less than $1.7 billion respectively - afterauctions that dragged on for more than a year.
Credit Suisse, no.4 on the league tables forannounced metals and mining deals this year, advised on both ofthose abandoned auctions and is also advising on another thatbankers expect to be shelved next - the sale of Rio's majoritystake in Iron Ore Company of Canada (IOC), for which the minerwants more than $3.5 billion. Canadian Imperial Bank of Commerce(CIBC) is also advising on the IOC sale.
Rio is also expected to pull the sale of its 29 percentstake in Coal & Allied in Australia, in what would be a painfulmove for Deutsche Bank, which has been advising it onthe deal that had been valued at $1.7 billion.
Morgan Stanley missed out on potential fees from a float ofRio's diamonds business. But because it advised Glencore on the takeover of Xstrata and Dubai Aluminium (Dubal)on the $15 billion merger of the Dubai and Abu Dhabi statealuminium producers, it tops the global league tables forannounced and completed metals and mining deals this year.
Macquarie, notably absent from the top 20 advisers onannounced and completed deals, worked for more than eight monthsadvising Fortescue Metals Group on the sale of aminority stake in its port and rail unit, with no deal in sight.
It's a situation bankers are still willing to go along within the hopes of better times ahead with major clients.
"When you are dealing with the big companies, you have to becareful about trying to cherry-pick," one senior industry bankersaid. "If you only want the great stuff, you won't last long."
