Mining giants are hunting for deals again after a decade on the sidelines


The biggest miner had already expanded its dealmaking team in London and was interested in pursuing a transformational deal, Bloomberg reported last year. The company has recently exited oil and gas and vowed to end thermal coal mining by the end of the decade. To replace those businesses, it’s looking to expand in copper and nickel and grow a fertiliser business.

BHP would be interested in the possibility of deals at the right price with companies such as Canadian fertiliser producer Nutrien and US copper giant Freeport-McMoRan, according to some of the people.

Nutrien’s mines and infrastructure surround BHP’s Jansen project — it has long been seen as a natural fit and the companies held talks about a potential partnership two years ago.

Freeport is the world’s largest publicly traded copper producer, at a time when the world’s biggest mining companies are all pushing to expand production.

Another large copper producer — Canada’s Teck Resources — is controlled through a dual-class share structure by the Keevil family, but could make an appealing target for one of the big miners if the family were willing to sell or merge part of the business.

The renewed focus on dealmaking comes as the miners themselves are receiving increased attention from both governments and investors, after the uncertainties created by Russia’s invasion of Ukraine helped spur worries about security of supply, driving up commodity prices. Metal markets are tight, with above-ground supplies for several at the tightest in recent history, while China’s reopening from COVID-19 lockdowns is threatening to jolt global demand. Over the longer term, the global drive to decarbonise will be dependent on an ever-increasing supply of natural resources.

Yet the rich valuations, with many miners trading at or near records, could also put a damper on dealmaking unless a wider global recession leads to lower commodity and equity prices. The big producers are also continuing efforts to refine their existing asset portfolios at the same time as they seek growth.

‘A lot of these guys don’t have much growth and deals are a way to address that. The size perspective is key though. It’s going to be hard to do the mega one.’

Analyst Ben Davis

Most of the major miners are also keen to grow output by expanding existing mines or through exploration and building new ones. The industry has been warning for years that there aren’t enough copper projects to meet future demand, and big deals often don’t bring on new production unless fresh capital can be deployed.

“A lot of these guys don’t have much growth and deals are a way to address that,” said Liberum analyst Ben Davis. “The size perspective is key though. It’s going to be hard to do the mega one.”

Like BHP, Rio Tinto made a big purchase last year, taking full control of Turquoise Hill Resources in a $US3.2 billion deal. The takeover was messy, with a vote postponed three times as Rio sought to win support from dissident shareholders. However, executives believe it showed investors that Rio can hold its nerve to resist the reckless spending that characterised its past dealmaking.


New Chairman Dominic Barton said at a conference in October that he believed the company had missed opportunities in recent years, in part because of concerns about investors’ reaction because of previous missteps.

Rio’s dealmaking focus has now shifted to lithium. The company has asked the biggest investment banks for pitches on lithium miners and is actively looking for deals.

Glencore, for so long the most aggressive dealmaker in the sector, has been quiet in recent years, instead choosing to sell many of its smaller assets.

Speaking to investors last month, CEO Gary Nagle emphasised that its focus would be on targets where it had existing relationships or shareholdings, or assets that were nearby its existing operations.

“These will be ones that are strategic for Glencore, where Glencore has some sort of strategic advantage, whether it be because we are — have existing shareholding, whether we have existing partnerships with the current owners,” Nagle said. “These will be very strategic M&A opportunities and not simple highest bid wins.”


One area where Glencore sees opportunities is aluminium, which the commodities trader buys and sells for others but does not produce itself. The company has looked in the past at a deal to buy US producer Alcoa. Last year, it held discussions with Noble Group to buy Jamaican alumina refinery Jamalco, but the talks fell apart, people familiar with the matter said.

Still, perhaps the most pressing item on Glencore’s to-do list is to decide the future of its Viterra agriculture business. The company’s options are to merge the business with a rival, sell a stake or an initial public offering.

The large, established producers aren’t the only ones looking for deals. State-backed Saudi Arabian Mining Co., or Maaden, announced a plan last week for a company that will buy minority stakes in international mining assets.

Maaden brings the financial muscle of its biggest shareholder, the Saudi sovereign wealth fund, which is also a partner in the new investment venture and was among the interested buyers of a minority stake in Brazilian company Vale’s nickel and copper assets.


The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

Source link

Denial of responsibility! Planetconcerns is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.

Leave a comment