Mining industry headed towards bull market

M&A in the mining industry is heating up and it’s showing no signs of cooling down. Data from S&P Global Market Intelligence shows that in the first half of 2020, the market has seen an aggregate of US$3.9 billion in gold transactions—in eight deals representing approximately 31.9 million ounces of gold reserves—with an average price of US$123/oz.

Mining Journal has published an article discussing the escalation of gold prices and what the outlook for M&A in the mining industry looks like.

The mining industry has seen two “mega-mergers” with Barrick Gold and Randgold, and Newmont and Goldcorp, but co-head of Torys’ Mining and Metals practice Mike Amm has told Mining Journal that consolidation in the industry will spur smaller players to band together.

"Smaller single-asset companies are not big enough to get attention as index admission becomes more important," Mike said.

Mike also weighed in on the change in behavior in M&A mining transactions, noting that the caution with which companies now procced is illustrated through the lack of absence of post-announcement competing bids.

"It is strange that we haven't seen a lot of contested deals. There would normally be more contested transactions in a hot market like this,” he said.

“The strong push for M&A is tinged with caution as everyone has taken the message that gone are the days of huge premiums and risky deals where people overpay. Even when the best assets come into play there will be more discipline than in the past."

Additionally, Mike spoke about the difficulty Chinese companies are facing as they try to strengthen their presence in the global market.

"Chinese companies are trying to ramp up their production, size and profile in the industry although it is becoming harder as they are under more scrutiny from the regulatory perspective in the U.S., Canada and Australia. Given the geopolitical situation, the degree of focus and weight on bilateral issues will be greater than a year or two ago," Mike said.

Subscribers can read the full piece on Mining Journal’s website.

You can learn more about Torys’ mining work by visiting the practice page.