As predictions of a dealmaking boom in the mining industry gain traction, top executives are urging caution, warning against repeating past mistakes. Companies are eager to secure commodities critical for clean energy, such as copper, which could drive a surge in mergers and acquisitions (M&A). Rio Tinto’s CEO, Jakob Stausholm, referenced the experience of his predecessor, Tom Albanese, who was ousted in 2013 following the ill-fated acquisition of Canadian aluminum producer Alcan in 2007. This deal contributed to $30 billion in writedowns after a market downturn for the metal. Stausholm emphasized that while opportunities may be arising, he feels “no fear of missing out” on potential deals.
Mark Bristow, CEO of Barrick Gold, echoed this sentiment, cautioning that the industry risks overstretching itself by overpaying for assets. The discussion around a potential M&A surge comes as major mining companies have strengthened their balance sheets over the past decade, potentially giving them the capacity for deals. Investment bankers suggest that the drive to secure supplies of metals essential for clean energy, particularly copper, will be the main catalyst for M&A activity. Miners are anticipating future shortages of these metals, which could lead to price increases as demand outstrips supply.
However, some analysts point to a decline in deal count, which fell to a five-year low in the first half of 2024, indicating that predictions of a boom may be overly optimistic. Lower earnings due to falling metal prices and inflation complicate deal-making, as they raise the costs associated with building new mines and acquiring assets. Despite these cautionary signs, the anticipated demand for copper in the clean energy transition is prompting companies to explore potential deals. Even specialized miners, such as gold producers Newmont and Barrick Gold, are showing interest in copper, leading to speculation that major copper producers like Teck, First Quantum, and Capstone Copper are now prime targets for acquisition.
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