Miners bound to megadeal playbook in pursuit of global scale
XLB•Mining companies are pursuing mergers, partnerships and internal growth to finance costly projects and navigate political hurdles, despite investor demands for capital discipline. New copper mines can cost $10 billion to $20 billion and take a decade or more to build.
1. Scale and financing
Mining companies are seeking scale through mergers and acquisitions and partnerships to address financial and geopolitical hurdles. Gold Fields’ $27.1 billion offer to Northern Star was rejected, while previous approaches by BHP and Rio Tinto also failed. Analysts say larger miners can use debt and cash flow to fund long-term projects.
2. Growth with discipline
Shareholders are demanding that growth come with strict capital discipline after companies wrote down billions of dollars following acquisitions made between 2005 and 2012. Investors distinguish between organic growth and joint ventures and large acquisitions that could destroy value if integration fails.
3. Political pressures
Governments are seeking greater control over critical minerals, while the United States and European Union have introduced trade restrictions aimed at reshoring supply chains. BHP’s failed $49 billion approach for Anglo American has reinforced a preference for internal growth and joint ventures, while Rio Tinto’s potential tie-up with Glencore remains a possibility, investors say.
