While low valuations, divestitures and cash-strapped juniors have set the stage for a buyer’s market, mining and metals companies aren’t necessarily biting.

In a report on mergers, acquisitions and capital raising in mining and metals for 1H13 made public Monday, EY suggests non-traditional investors—primarily state-backed investors and financial investors, such as private capital and investment funds—are “increasingly targeting the resources sector as valuation have plummeted, in an attempt to capture upside once confidence returns to the sector.”

“Those funds that can afford to hold an asset until the cycle turns can see real value in the market right now,” said EY Global Mining & Metals Transaction Leader, Lee Downham. ”But if your investment horizon is short, as many public shareholders’ are, then the decision to invest the capital is not straight forward.”

“Additionally, Asian state-owned enterprises (SOEs) are expected to remain strong contenders for mining and metals assets of strategic interest,” he noted.

North America was both the preferred destination and the most active acquirer, with largely domestic consolidation in Canada and the U.S. North American deal activity was characterized by mergers among smaller companies to pool resources and the acquisition of assets in familiar low-risk territory, said the report.

Gold was the most targeted commodity in the first half of this year, with deal value increasing year-over-year, driven by domestic deal activity in Russia, said EY. However, gold deal volume declined 23% y-o-y when the price of gold witnesses a significant downslide.

While the mining industry focused on capital optimization and debt reduction to divest non-core and high-cost assets, many companies were struggling to find buyers. “This could lead to distressed asset sales, benefitting bargain hunters with mid-to-long-term investment horizons,” said the report.

Many of the assets for sale by senior producers offer supporting infrastructure and the latest technology. Producing or near-production assets are most likely to find corporate buyers and interest from privately managed capital, EY advised.

However, juniors have experienced “a catastrophic withdrawal of equity capital, particularly for those at the early exploration end of the industry. …Average proceeds raised by juniors fell to just $1.6 mn—fundraising for survival in desperate times.”

Only 12 IPOs were reported during the first half of this year, a 69% decline. The largest of these was Chinalco spinning out its Peruvian copper assets on the Hong Kong Stock Exchange.

Proceeds raised from convertible bond issues in the first half of this year totaled $5.9 billion with the largest issue coming from ArcelorMittal raising $2.25 billion to reduce its debt.

Proceeds raised from bond issues in the first half of the year totalled $50.3 billion, a $7-billion decline from the first half of 2012. Both Rio Tinto and Freeport-McMoRan Copper & Gold raised money through bond issues.

The largest syndicated loan raised in the first half of this year involved what EY called “an exceptional deal by Glencore Xstrata in the form of $17b of revolving credit facilities with a syndicate of 80 banks—reportedly one of the largest European loans this year (in all sectors).” In total, loan proceeds of $89 billion were closed from 80 loan packages for the first half of this year, according to the report.

“We are hopeful that this is the bottom of the cycle for capital raising,” said Downham. “There is a sense that companies are beginning to think about going back to equity markets and we are beginning to see companies preparing for IPO when the market returns.”