The mining industry, which is poised for consolidation due to the slowdown in manufacturing and the surge in demand for industrial metals, especially in top consumer China, is predicted to see an acceleration of joint ventures and asset sales.
Ahead of the global copper sector gathering for the CESCO convention in Santiago, Chile next week, investors stated that prohibitively high costs and high odds of eventual rejection could currently hinder full-scale mergers and acquisitions activity among diversified miners.
The LSEG data, which shows that M&A in the mining sector plummeted 27% in value terms to $15 billion in the first quarter compared to the same 2024 period, demonstrates reluctance to engage at the firm level.
BHP’s stock has fallen 26%, Rio Tinto’s stock has fallen 23%, and Glencore’s stock has fallen 42% since the beginning of 2024.
Businesses like Rio Tinto and BHP have strong balance sheets and give shareholders good returns, but they are on the verge of a period of stagnant profit growth.
Due to trade battles sparked by US President Donald Trump’s import tariffs and the fact that no other nation can make up the slack left by China, miners are increasingly considering using scale to create strength and value.
George Cheveley, portfolio manager of Investment Manager Ninety One, stated, “We are seeing more discussions about partnering, joint ventures, and asset sales.”
Smaller transactions are more likely to occur than large takeovers. They are simpler to regulate and a simpler method of increasing your asset base and reducing portfolio risk.
Additionally, the Australian-listed BHP and Lundin Mining recently established a joint venture called Vicuña. Vicuña now holds the Josemaria project in Chile and the Filo copper project in Argentina.
Having trouble with deteriorating ore grades Beginning with the Escondida venture, BHP intends to invest $10.8 billion in Chile over a ten-year period.
Some have generally chosen to increase shareholder returns through dividends and share buybacks rather than investing for growth.
James Whiteside, head of corporate for metals and mining at Wood Mackenzie, stated, “Our analysis suggests that valuation multiples are not responding to higher payout ratios and buybacks are no longer delivering strong returns, making the pivot to growth more appealing.”
“Investing in production growth pays off, but diversified companies looking for relevance through large payouts aren’t getting rewarded.”
Historical examples
According to Christel Bories, chairman of the French mining group Eramet, “merger talks typically take place at the very top of the cycle, because mining companies have a lot of money, or at the very bottom of the cycle, because there is a need to find ways to create value.”
When London-listed Glencore’s bid to purchase Teck Resources for $23 billion was turned down in April 2023, the process began. Instead, Teck’s metallurgical coal portfolio was purchased by Glencore for $7 billion.However, the mining industry realised that a reorganisation was imminent when the largest miner in the world, BHP, made a hostile bid of $49 billion for Anglo American.
According to Liberum analyst Tom Price, “BHP’s initiating the M&A cycle is significant in the mining industry because it facilitates other CEOs’ ability to pitch the idea to their boards.”
Forecasts of skyrocketing copper demand, partially as a result of power grid improvements and replacements, as well as e-mobility—which includes electric cars, scooters, and bicycles—have made it simpler to pitch the idea of M&A to business boards this time.
Benchmark Mineral Intelligence (BMI), an information source, projects that the demand for copper from these two end-use segments will reach 4 million metric tonnes in 2030, or 13% of the world’s refined demand, up from 2.6 million tonnes or 9.5% this year.
The consulting firm Wood Mackenzie estimates that miners will need to spend $200 billion in total to boost their output of copper by 9.6 million tonnes.
About 55% and 50% of the world’s use of copper and aluminium, which are used in building, packaging, and transportation, respectively, comes from China’s enormous manufacturing sector.
“China’s various strategies over the past few years have only stabilised activity in its commodity-intensive property and infrastructure sectors, even though stimulus is likely needed.” “They’re still pretty weak,” Liberum’s Price stated.
source; mining dot com
English 
French