Mining Industry

Q3 2022: Mergers and Acquisitions Trend Report

Industry Overview

• M&A activity within the mining sector has accelerated due to strong commodity prices and repaired balance sheets from the COVID-19 Pandemic.
• The industry involves the extraction of precious minerals and other geological materials from the Earth. The industry can be classified into four groups:
  1. Oil and Gas Extraction
  2. Coal Mining
  3. Metallic Mining, including the extraction of gold, silver, iron ore, copper, nickel, lead, among other metallic commodities
  4. Nonmetallic mining, such as stone, sand, and gravel mining
• The mining industry is expected to experience long-term structural decline due to increased pace of energy transition and weak consumption outlook.
• Many of these subsectors have been going through structural transitions as more countries seek to combat climate change by limiting fossil fuel emissions.
• The COVID-19 pandemic has accelerated the global energy transition as a combination of temporary economic pause and fiscal stimulus targeted at green energy initiatives have begun to shift global energy consumption.

Key Industry Trends

• The US thermal coal demand outlook is set to deteriorate in the second half of the decade, as power supply shifts away from coal at an increasing rate, putting downward pressure on thermal coal prices.
• A thin pipeline of new projects due to weak long-term price outlook will hinder future production as older mines retire.
• The need for green and critical minerals is attracting companies outside of traditional mining environments such as Lithium.

Recent M&A Transactions

Historical Performance

• The Oil and gas Extraction and O&G Gas Field Services industries account for 89% of industry revenue in 2022.
• The mining industry has been largely dependent on foreign resources with imports regularly accounting for over one third of industry revenue.
• Over the past five years, Mining industry revenue has increased at an annualized rate of 11.4% to $1.0 trillion due to rising prices in oil and gas.

Future Industry Growth

• The Mining Sector is forecasted to decrease revenue by an annualized 4.1% to $814.8 billion over the five years to 2027.
• Demand and production are expected to slow due toincreasing number of idle mining facilities and decreasing sector employment.
• Price of crude oil and natural are expected to decrease at an annualized 7.5% and 13.1% respectively.