Mining M&A to ramp up as COVID-19 crisis diminishes, says BMO Capital Markets

The level of mergers and acquisitions (M&A) in the mining sector will soon pick up as the global economy recovers from the COVID-19 crisis and miners benefit from a growing commodities boom, according to individuals from investment bank BMO Capital Markets.

Mining companies will seek to expand through M&A once lingering uncertainties from the pandemic dissipate and while they find themselves cashed up after resurgent demand and supply shortfalls have pushed metals prices and company earnings to levels not seen for a decade.

“History has shown that when there’s positive momentum in commodity prices that tends to drive M&A activity,” BMO’s global metals and mining group co-head Ilan Bahar said in an interview ahead of BMO’s 30th annual Global Metals and Mining Conference, which started yesterday. “As the world opens up – if the commodity price remains strong – we expect M&A to follow,” he added.

The five-day virtual gathering has attracted a record number of equity investors and presenting companies, with the deal-making environment among the key topics of the conference.

“It [the market] feels pretty busy,” said Bahar’s fellow co-head Jamie Rogers. “There’s still that stumbling block of boards and directors trying to get over the hurdle of ‘how can I step out and make a big acquisition without putting boots on the ground?’”

Travel restrictions due to the COVID-19 pandemic have prevented miners from performing on-site due diligence at prospective acquisitions, but the start of vaccine programmes around the world have improved prospects for the completion of M&A deals in the sector.