The metals and mining industry is not experiencing the slowdown in dealmaking that many other industries are being hit with right now, with deal values totalling $7.4 billion in April 2022. This is a clear sign that the market is healthy and growing and investors can likely expect this trend to continue in the months ahead.
$7.4 billion was an 81.5% increase from March, which recorded $4.1 billion and an increase over the previous 12-month average of 49.4% from $4.3 billion, according to the data from GlobalData. The largest deal of the period was AKROPOL GROUP’s $6.3 billion acquisition of a 29.99% stake in Polyus. The Asia-Pacific region was the biggest in terms of deal volumes, followed by Europe and North America.
The top countries for M&A activity in April 2022 are also indicators of some of the strongest mining jurisdictions. The number one country was Australia, followed by Canada and then China. Canadian mining companies have been on a bit of a buying spree lately, both domestically and internationally. Canadian mining companies are also some of the biggest explorers and developers of significant and high-value properties.
Solaris Resources (TSX:SLS; OTCQB: SLSSF), a Vancouver-based copper exploration company with its flagship Warintza Project in Ecuador, recently announced an agreement with the Government of Ecuador in relation to an Investment Protection Agreement for the project. The IPA freezes in place the stability of mining regulations, security of title and investments, and offers new incentives in the form of a further 5% reduction in income taxes, fixing this to 20% on new investments for the Warintza Project. The government also recently declared the Warintza Project a ‘Strategic Priority Project’, with an accelerated permitting timeline for completion in 2024. This is as fast as any global major could possibly get themselves into a position to construct this project. This is a major boost for the company, the project, and Ecuador.
Solaris’ investments in the project are also reflective of the mining industry’s appetite for further investment in new copper projects that could add to the production profiles of some of the biggest mining companies. Major mining companies often have several billion-dollar projects in their portfolios, but these have been slow to come online due to various delays.
As a result, M&A is the quickest way for these companies to add new production, and we can expect to see more of it in the months ahead. 2022 has seen several major deals, and the rest of the year is likely to remain positive for the industry’s dealmaking.
The biggest deals in April 2022 according to GlobalData were:
- AKROPOL GROUP acquired a 29.99% stake in Polyus for $6.3 billion
- Korea Zinc acquired Sun Metals Holdings for $311.5 million
- Norsk Hydro acquired Alumetal for $238.56 million
The two spaces where dealmaking has accelerated in the past few years are the battery metals and green tech minerals space. Copper, cobalt, lithium, nickel, and rare earths are all in high demand due to their use in electric vehicles and batteries. And, with the world slowly but surely moving towards a low-carbon future, the demand for these minerals is only going to increase.
Mining companies are jockeying for position by buying up properties with these minerals, and we can expect to see more consolidation in the industry as companies look to increase their holdings.
This has also boosted foreign investment in stable mining jurisdictions like Canada, Ecuador, and Australia. And, with commodity prices on the rise, we can expect to see even more M&A activity in the months and years ahead.
Ecuador has stood out as a stable mining-friendly jurisdiction, especially in the midst of Peruvian protests and Mexican resource nationalization, creating an opportunity for projects to advance more rapidly and with fewer roadblocks. The Government is pushing for community engagement and collaboration prior to the start of mining activities with project development occurring alongside community development ensuring social support for the responsible advancement of projects.