M&A In The Global Mining Sector

The global mining sector employs millions of people worldwide, and its role in the global economy continues to evolve significantly. Standard functions in the mining industry include the production of metals and metals investing and trading. Additionally, a strong correlation exists between the global mining industry and other industries. For example, elements such as copper, nickel, and aluminum are core components used in the construction, aviation, automobile, and other industries. In areas where mining is more concentrated, the industry plays a more important role in local economies.

According to the International Council on Mining and Metals, at least 70 countries are extremely dependent on the mining industry, and most low-income countries rely on it to survive. The same study shows that in many low-middle income countries, mining accounts for as much as 60-90% of total foreign direct investment.

Increased populations and urbanization drive the demand for growth in mining activities, as there is more demand for cars, buildings, and consumer products.

M&A Challenges and Considerations

Mergers and acquisitions can be intense in the global mining industry. They are heavily influenced by timing, fluctuating commodity prices, and supply uncertainties and come with many variables depending on transaction size, volatile markets, and the geo-location of the mine. There has been a spike in M&A activity due to a straight land grab for metal and mining assets, especially in emerging markets. Commodity companies have been looking to consolidate quickly while other sector players have watched from the sidelines. However, these players are becoming motivated to act due to the scarcity of certain metals, changing geopolitics, and green energy trends. For example, in 2023, deal value across the global mining market totaled $121 billion—up a whopping 75% from 2022.

When it comes to M&A, certain considerations are unique to the mining industry:

• Mining projects can have limited lifecycles depending on the availability of deposits.
• Mines cannot be relocated to areas that may be more beneficial economically or politically.
• Because there are great technological and geological constraints, mining companies cannot adjust production to increase revenue.
• Funding is less readily available, access to bank financing is limited, and investors tend to be more cautious and selective.
• Countries may have greater government regulations and indigenous mining agreements designed to mitigate negative effects and share the benefits of commercial mining activity.
• In some parts of the world, there are human rights concerns, increased policing for corruption, and environmental impacts.
• Once the ore is extracted, mine closure procedures can take several years, in turn, expending money and labor for activities that are not yielding any profits during that time frame.

Gold Mining Sector

The gold mining industry is known for placing a high premium on growth. In recent years, analysts have reported that the leaders of gold mining companies say that they find mergers and acquisitions to be an easier path to growth than exploring new untapped deposits underground. Modern M&A deals in the gold mining business now focus more on capital efficiency and operational excellence, heavily emphasizing evaluating the management team.

The right resources, the right process, the right buyer – the right time is now.

Copper Mining Sector

Copper is an essential metal needed by industrial economies. Globally, the copper mining industry is one of the leading metal mining markets. The continued innovations in battery technology continue to attract investment into metals such as copper, which plays a critical component in the function of batteries.

Coal Mining Sector

Coal has been widely used to provide power since the Industrial Revolution in the 1800s. In the 21st century, coal mining faces new challenges alongside the pursuit and popularity of renewable energy sources. At the same time, innovation in the coal mining industry remains alive. New, state-of-the-art technologies are being developed. Sophisticated robotic mining machinery and computerized systems are being used to streamline mining and boost production to unprecedented levels. And industry leaders are looking into new uses for coal beyond its long-standing role in the energy sector. An example is the development of carbon fiber, currently used in the aerospace field and potentially used in prosthetics, electrodes, 3D printers, and more.

Shared Buyer and Seller Risk

In the mining sector, both buyers and sellers alike face risks of deal failure but are more likely to see success if a strategic plan is followed. Two of the most important factors are pricing efficiency and post-sale integration. Both buyers and sellers tend to be more cautious in this industry.

• Sellers should expect buyers to be on the lookout for the risk of overpaying for your company, being unable to integrate the company as efficiently as possible, and dealing with issues such as uninsured legacy liabilities. Buyers may become interested in underperforming assets because they have more experience and access to financing than the existing owner, as well as better government relationships, a different risk profile, and the option of consolidation with existing mines or facilities. 
• Sellers risk facing purchase price disputes and post-deal issues with warranty and indemnity claims. Plus, fluctuating markets, especially in mineral-rich regions such as Africa, can make valuation difficult.

If proper precautions are taken to understand and avoid these issues, overpayment or post-close surprises can be averted. Other benefits of proper preparation include improved sale and purchase agreements, smoother integration, and more efficient corporate governance. Enlisting experienced M&A advisors as early in the process as possible can aid in significantly mitigating transactional risks.

Contact Us

Please feel free to call us at Benchmark International to set up a conversation with one of our M&A specialists if you are considering selling a business. We look forward to discussing how we can help you with growth strategies, exit planning, or any transaction advice you may need.

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