Lagos — Metals and mining industry mergers and acquisitions (M&As) worth $1.9bn were announced in September 2019.
GlobalData Mining Technology writer Jack Unwin looks at what is driving this trend, and how it is benefitting China in particular.
Chinese companies have been very active in the mining sector and they don’t appear to be ask risk averse as companies from other countries. This has enabled them to pick up some interesting assets from under the noses of the majors.
Oliver Wright from deal legal advisers White & Case says: “Recently companies have been coming under pressure to demonstrate growth and the quickest and most cost-effective way of doing this has been for the majors to consolidate and look to M&A for growth. This has driven significant transactions in 2018-19 and I think we will continue to see more M&A activity as a result of those transactions.
“There is also an objective for companies to undertake a sale of non-core assets. This begs the obvious question of who is going to buy these assets, which depends to some extent on the location of the assets. Assets that are in Africa, Latin America in politically sensitive jurisdictions seem to be likely targets for Chinese companies.
“What we’re also seeing is them having a willingness to take on the risk of investing in minerals like cobalt in politically risky areas such as the Democratic Republic of Congo (DRC). Western companies don’t have the same appetite and are not as comfortable in these jurisdictions. These Chinese companies have very sophisticated mining technology that is highly regarded by Western companies and they are playing a very significant role in the global mining landscape now.”
“The ongoing trade wars between China and the US will inevitably have an impact on global growth generally and may well impact mining, the need for minerals depends on the amount of growth going on in places like China. The number of new cars on the road will obviously drive demand and if anything puts that growth at risk then we may see a change in the cycle.”