Mining, Minerals, and Natural Resources

The outlook for the Mining, Mineral, & Natural Resources industry is bright. This industry extracts valuable resources and minerals that are used by industrial, commercial, and residential consumers. Revenue within this industry has increased from the rise of domestic production, firmer prices, and overall economic growth in the last five years. The gradual easement of global restrictions has improved the business landscape, but low levels of air and road travel, in addition to a monumental setback in general industrial activity are anticipated to hinder a swift recovery.

Rising commodity prices with an improvement in economic activity is expected to fuel industry revenue growth. Due to the COVID-19 pandemic, Merger and Acquisitions (M&A) activity declined by one-third in the last year. M&A activity is anticipated to surge due to the record high prices for gold and an ongoing economic recovery that supports deal activity among industrials including copper, nickel, and zinc. Exhibit 1 shows the performance of the Mining, Minerals & Natural Resources sector since 2016 relative to the overall economy, comparing sector revenue change to GDP growth from 2016-4Q2020.

Mining, Mineral, & Natural Resources revenue totaled $473 billion in 2020. While industry revenue increased 0.1% from 2015-2020, the industry is expected to grow at an annualized rate of 4.2% from 2021-2026. International trade is anticipated to provide a vital revenue stream, particularly for coal and hydrocarbon producers. The entrance of new companies is expected to be constrained due to the uncertainty of the global commodity markets and the growth in the dominance of large industry operators. Exhibit 2 shows the trends in investing activity from 2015-2020.

Demand for products within the Mining, Minerals, & Natural Resources industry is largely dependent on manufacturing and construction activity as well as the consumer demand for goods and services that incorporate the use of industrial commodities. Many downstream businesses within the industry experienced supply chain disruptions which led to scaled back production and reduction of purchases. Strong commodity prices along with robust balance sheets are set to accelerate M&A activity within the industry. As the capital available for M&A activity is limited, businesses within the industry that have excess cash on hand are expected to seize an opportunity for market share growth. Companies may engage in deals to diversify their resources of raw materials and alter costs through a collaborative approach of multiuser open access.

Mining, Minerals,& Natural Resource M&A deals worth $16.7 billion had been announced globally as of the end of FY2020, which include Mitsubishi Materials and Mantos Copper Holding, Premier Gold Mines and Osgood Mining, Bullfrog Gold and Barrick Gold, Altius Minerals’ and Liberty Metals & Mining Holdings, and Tronox & TiZir Titanium and Iron. Mitsubishi Materials acquired Mantos Copper Holding for $263 million as part of their strategic plan to create a sustainable portfolio of raw materials that consists of clean copper concentrates. Premier Gold Mines’ acquisition of Osgood Mining for $50 million was to add property that has a long track record of successful gold production. Similarly, Bullfrog Gold acquired Barrick Gold for $17 million to add to their amount of acreage and strengthen their board of directors and management team.

Altius Minerals acquired Liberty Metals & Mining for $52 million to add mines that have collective potential to almost double production. Tronox’s acquisition of TiZir Titanium and Iron for $300millionwas part of their strategic plan to advance their vertical integration strategy. In sum, the overall outlook for M&A activity in the Mining, Minerals & Natural Resources industry appears to remain strong due to the improving macroeconomic conditions and rising commodity prices.

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