The mining industry is poised for consolidation, with joint ventures (JVs) and asset sales expected to accelerate due to a manufacturing slowdown and waning demand for industrial metals, especially from China, reported Reuters.
However, the prospect of full-scale mergers and acquisitions (M&A) among diversified miners may be curtailed by high costs and the likelihood of regulatory rejection, according to investors, ahead of the CESCO copper industry event in Santiago, Chile.
The reluctance to pursue company-level engagements is reflected in London Stock Exchange Group data, which indicates a 27% decrease in mining sector M&A value to $15bn in the first quarter of this year compared with the same period in 2024.
Major mining companies such as BHP and Rio Tinto, despite strong balance sheets and significant shareholder returns, are facing a period of stagnant earnings growth, the report stated.
With the US-China trade wars and no other country filling the void left by China, miners are focusing on value creation and strength through scale.
Ninety One portfolio manager George Cheveley said: "We are seeing more discussions about partnering, joint ventures and asset sales.”
Cheveley added that smaller deals are more likely as they are simpler from a regulatory standpoint and can enhance asset bases while reducing portfolio risks.
BHP, listed in Australia, has also recently established a JV named Vicuña with Lundin Mining, which now owns the Filo copper project in Argentina and the Josemaria project in Chile.
Facing declining ore grades, BHP plans to invest $10.8bn (A$17.4bn) in Chile over ten years, starting with the Escondida operation.
Instead of growth investments, some companies have preferred to increase shareholder returns through dividends and share buybacks.
Christel Bories, chairman of French mining group Eramet, said: “Historically, merger discussions often occur either at the very top of the cycle, because mining companies have a lot of money, or at the very bottom of the cycle, because there is a need to find ways to create value.”
The industry took notice of a potential restructuring when BHP made a $49bn hostile bid for Anglo American.
Similarly, Glencore's $23bn (SFr19.69bn) attempt to acquire Teck Resources was rejected, leading Glencore to purchase Teck's metallurgical coal portfolio for $7bn instead.
The idea of M&A has become more palatable to company boards due to predictions of surging copper demand driven by power grid replacements, upgrades and e-mobility, including electric vehicles, the report highlighted.
