In order to draw in generalist investors and enable complicated new supply projects, global asset manager BlackRock supports additional consolidation among major mining firms. Portfolio manager Olivia Markham emphasized the scale issues facing the mining industry in comparison to industries like technology during her speech at the Australian Financial Review (AFR) conference in Perth.
Markham clarified that large, liquid stocks are preferred by US generalist investors. Larger businesses usually trade at higher multiples, have the personnel and experience needed for complex projects, and provide better access to funding. She said, “We’ve had a wave of M&A, but I see merit in more.” BlackRock is a multinational investment management company that offers technology and asset management services. It supports both retail and institutional clients in achieving their financial objectives across a range of asset classes.
This drive for consolidation is in line with the growing demand for commodities, which necessitates a substantial increase in supply due to trends like electrification, artificial intelligence, and defense spending. With “every exciting theme” returning to mining, Markham emphasized that the commodity intensity of GDP growth is still increasing. However, the supply side is still “massively underinvested,” suggesting that prices will increase to encourage new supply. The blockade of the Strait of Hormuz, she continued, is encouraging the use of other energy sources, such as uranium, in the fight for energy independence.
Despite having investments in significant miners such as BHP, Rio Tinto, and Glencore, BlackRock’s exposure to Australia has decreased throughout the last five years. This is explained by Australia’s decreased cost competitiveness after COVID and an emphasis on copper-rich areas.
