Financial services group Absa expects SA’s mining companies to open their cheque books and hunt for deals as inflation decelerates and the interest rate cycle turns, making the financing of mergers and acquisitions cheaper.
Konosoang Asare-Bediako, an investment banker at Absa Corporate and Investment Banking, said a lot of factors point to renewed deal-making appetite from the mining sector.
“We believe the mining, energy and resources sectors will see the highest degree of activity. The mega-trend of energy transition continues to drive the demand for ‘metals of the future’. Deal-flow will be driven by those who have them, those who want them, and those who discover them,” Asare-Bediako said.
“We are seeing this play out with BHP’s proposed $43bn takeover of Anglo American that would bring together two global mining companies and rank as one of the mining industry’s largest transactions in years,”
“Copper, the world’s most important industrial metal, lies at the centre of BHP’s bid for Anglo American. It is Anglo’s rich copper mines in Chile and Peru that are the main drivers of BHP’s bid. While consolidation will not build the production profile of copper and the industry consensus is that mining companies need to invest more in exploring for and developing new deposits, the challenge remains that even with the copper price on the rise, it is still below levels needed to incentivise the building of new mines.”
The hunt for copper assets has seen oil rich Middle East countries enter the fray. Abu Dhabi’s International Resources Holding (IRH) bought a controlling stake in Zambia’s Mopani copper mine in 2023.
This is as sovereign wealth funds and other asset allocators aligned to governments look to diversify their income streams from oil.
IRH outbid the likes of Sibanye-Stillwater to seize a controlling 51% stake in Mopani Copper Mine, in a deal worth $1.1bn.
IRH is a subsidiary of the United Arab Emirates’ (UAE’s) most valuable listed company, International Holdings Company (IHC), which has a market value of about $240bn. IHC is chaired by a senior member of the ruling family, Sheikh Tahnoon bin Zayed Al-Nahyan.
Asare-Bediako said apart from the pursuit of “metals of the future,” there is a pressing need for SA corporations to diversify their earnings base outside SA.
“The challenges at Eskom and Transnet are a significant impediment to SA’s economic growth. This will force corporates with growth ambitions to look at outbound deals. Here, they can look at G7 economies which hold the allure of hard-currency earnings, or at Brics+ economies which hold the growth prospects of half of the world’s population,” Asare-Bediako said.
“Brics+ nations are keen to forge stronger economic ties amongst themselves and by increasing their membership from five to ten, their economies are now 20% larger than the G7. While its members may not have a cohesive geopolitical agenda, they are aligned and emboldened in challenging the global economic order set by the G7. We could well see Brics+ using M&A to do this.”
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