Demand for critical minerals copper and lithium dominated M&A in 2023 as the world’s top miners scrambled for these assets, consultancy firm PwC says in it’s “Mine 2024" report released this week.
PwC’s Africa energy, utilities and resources leader, Andries Rossouw, told a news conference at the launch of the report that they expected the trend to continue.
“If you look at 2019, the level of critical metal deals was only 22% of total deals, now they are sitting on 40%. The expectation that this will continue is there, with copper and lithium dominating those deals by over 70%,” he said, adding that copper accounted for more than 80% of the total value of critical mineral transactions.
In addition to copper and lithium, critical metals include uranium, nickel, zinc, cobalt, and rare earth elements that are important in driving global ambitions for cleaner energy.
The report noted that while in 2023 the total number of deals involving the world’s Top-40 miners fell about 15% compared to 2022, the total value of those deals rose more than 3% to more than $64bn (about R1.17-trillion). Critical minerals and metals were hot property, as the percentage of deals involving these commodities rose to 40% in 2023.
However, it found the financial performance of the world’s Top-40 mining companies was squeezed by falling commodity prices and rising costs, which resulted in revenues falling more than 7%, despite increases in the production of important commodities.
Combined global mining revenue was $844bn. Earnings before interest, tax, depreciation and amortisation were $216bn, and mining firms collectively netted $89bn in profits. However, PwC sees mining revenues declining by a further 7% in 2024 as the downward trend continues, marking the first time since 2016 that industry revenues would fall for a second consecutive year.
M&A has remained a pivotal strategy for mining companies aiming to sustain their competitive advantage, expedite transformation, and secure essential resources for future growth.
— Andries Rossouw, PwC
Rossouw said that owing to uncertainty about which commodities would be the winners and losers in the future when it came to energy-transition needs, the safe-bet investment was copper.
The metal was also centre stage when Australian miner BHP Billiton launched a sensational $49bn bid for Anglo American, which was rejected three times by the board of the London- and Joburg-listed miner. BHP had made it clear in its pursuit that it was especially interested in Anglo's copper-rich assets, such as Quellaveco in Peru and Los Bronces and Collahuasi in Chile.
Rossouw said the BHP offer underscored a scramble for resources.
“It is a scramble at the right price. It is a scramble for the right commodities, depending on the view of what the commodities are.”
Rossouw said that, with the low commodity-price cycle, there were likely to be opportunistic deals in 2024.
“The reality is that those prices dropped. Low market capitalisation does open up opportunities and the same for other commodities,” he said.
Owing to low commodity prices, especially platinum-group metals (PGM), all South African-based PGM miners — barring Anglo American — had dropped out of the PwC Top-40 list.
Rossouw said falling prices and high costs had seen Sibanye-Stillwater and Impala Platinum not making the cut. BHP maintains its status as the most-valuable mining company.
Despite the commodity price crunch, Rossouw expects M&A to remain critical for the sustainability of mining houses. “M&A has remained a pivotal strategy for mining companies aiming to sustain their competitive advantage, expedite transformation, and secure essential resources for future growth.”
Meanwhile, the Minerals Council South Africa, which represents 80% of South Africa’s mining industry, said the industry had been hurt by low commodity prices, infrastructure bottlenecks and legislative red tape.
Speaking at the council’s 134th AGM in Johannesburg, Minerals Council CEO Mzila Mthenjane said South Africa needed to make mining an important economic priority.
“It needs to be firmly placed as one of the important drivers of the South African economy. The multiplier effects are uncontested, and these can be realised. I think the mistake of not categorically addressing mining as one of the important drivers of our economy needs to be addressed.”
“In a country where the economy is not growing, we can see the impact of that in terms of economic growth of less than 1%, but a population growth of more than 1%. It means South Africans are getting poorer, which is not good for business.”
He said mining should be the “epicentre” of the economy and social wellbeing, given its multiplier impact. For example, a R1m increase in output, based on 2022 numbers, resulted in 2.5 employment opportunities economywide. However, infrastructure was failing the industry.
“The decline in recent years in mining output performance is because of infrastructure.”
After enjoying the tailwind of the commodity-price super cycle, the mining industry’s profitability was taking strain. Its contribution to South Africa’s GDP had shrunk to 6.3% in 2023 — back to levels last seen in 2020, and down from a contribution of 7.3% in the previous year, according to the council’s latest integrated annual review.
Mthenjane said the council was hoping, under the government of national unity, for the appointment of a minister of mineral resources & energy who would engage the industry on important issues.
“Gwede Mantashe has always shared with us how he was the shop steward of the mining industry in parliament. We need the whole department to be the shop steward of mining in terms of how it engages with other departments.”
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