M&A in the Mining Industry on the Rise

Dealmaking in the mining industry just became hotter this year after an unsolicited proposal to combine two of the world’s top senior gold producers—a merger that could turn into the biggest gold mining sector acquisition ever.

Newmont Corporation bid to acquire 100% of Australia’s Newcrest Mining—rejected by the takeover target at this point—sparked talk about a new wave of consolidation in the mining sector, driven by high gold prices and the pursuit of supply of key metals for the energy transition, including copper and lithium.

Analysts and industry professionals expect mining companies to accelerate M&A activity this year.

Newmont’s bid of $16.9Billion was accepted unanimously by Newcrest’s Board. rejected The offer was rejected “as it doesn’t represent sufficient value to Newcrest shareholders”, but Newmont stated that it is willing to give non-exclusive access “to determine if Newmont could provide an improved proposal for consideration of the Board that appropriately reflects Newcrest’s value.”

Industry executives claim that regardless of whether Newmont offers a higher offer to Newcrest, the mining sector is ready for a new wave.

This year is likely to see more mergers in the gold mining sector, Endeavour Mining’s President and chief executive Sébastien de Montessus told Reuters in an interview Last month, just days after the news of Newmont’s megamerger proposal broke,

“I believe we will likely see more,” [deals]”This is simply because some companies don’t have a clear strategy,” de Montessus explained to Reuters.

“You have historical companies such as IAMGOLD and Gold Fields. There are many questions about their portfolio and whether or not their strategy is clear enough to investors and shareholders.

As companies seek to replace assets that are no longer in use, there will be more mergers and acquisitions in gold mining. According to Peter Steenkamp (CEO Harmony Gold), these types of transactions are not uncommon. Reuters This week.

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According to industry professionals it’s not just the gold sector that is ready for consolidation.

Alex Christopher, president of the Prospectors & Developers Association of Canada (PDAC), told Bloomberg Many of the small- to medium-sized businesses in the associations would look for growth through deals.

“Clearly a lot of them look to M&A for growth, though. They often want to discover assets that larger companies would later take over,” Christopher said to Bloomberg in advance of the Toronto’s premier mineral exploration conference.

Numerous major mining deals were either completed or announced in the weeks leading up to the conference. Rio Tinto, as an example, has completed several major mining deals. completed its acquisition Turquoise Hill Resources, which is worth approximately $3.1 billion, will significantly increase Rio Tinto’s copper portfolio. B2Gold has agreed to buy Sabina Gold & Silver Corp and its gold-mining project in Canada, while mining giant BHP could be close to its biggest acquisition in over a decade With the offer to purchase OZ Minerals, an Australian copper-gold producer.

Copper assets are being added to companies in anticipation of an increase in copper prices expected copper supply crunch The energy transition. A huge shortage of copper is imminent, Glencore, a mining and commodities company, stated at the end last year. It reiterated warnings by other industry players, analysts, and others that a supply crisis could slow down the energy transition.

The demand for key metals, such as nickel, cobalt, and copper, is increasing due to the growing efforts towards decarbonization.

The energy transition was the key driver behind 25% of the top 20 mergers and acquisitions (M&A) deals in mining in 2022, as the industry responded to consumer and shareholder demand for portfolio diversification and sustainability, data and analytics company GlobalData said in a report last month.

“Mining companies have been shifting their portfolios to concentrate more on future-facing metallics,” William Tyson from GlobalData, Associate Analyst, Thematic Intelligence said in his comment on the report.

“The shortages of these metals and the growth in demand for EVs have prompted M&A deal activity as mining companies consolidate to fill the gap in supply.” 

By Tsvetana Paraskova for Oilprice.com

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