Amid bumper profits and growing demand for green energy, the recent surge in merger and acquisition activity for the global mining sector is set to continue, Fitch Ratings says.
In a report, the rating agency said M&A deal activity is on track for its highest level in a decade, as strong profits in 2021 and 2022 have given mining companies added capacity to make deals.
“Miners’ financial profiles will remain resilient in the short to medium term as commodity prices remain above mid-cycle levels, despite significant normalization in prices year-to-date, which will provide financial flexibility for M&A,” the report said.
Consolidation activity will also be driven by the broader shift to greener energy, it suggested.
“Changing demand patterns brought about by the energy transition, increasingly lengthy greenfield project construction timelines and limited organic growth options should support deal activity beyond 2023,” Fitch said.
“Miners will be particularly active in future-facing metals such as lithium, nickel and copper, where the market is likely to be in structural deficit beyond 2026,” it added.
Additionally, Fitch sees prospects for added consolidation as corporate valuations eventually recede.
“Lower prices in the coming years may also spur further acquisitive activity, as lower valuations present strategic consolidation opportunities, particularly in the still fragmented gold sector,” it said.