Mining companies are expanding into new minerals and regions to reduce concentration risk as geopolitical tension and the race for critical minerals drive price volatility and policy shifts.
This is according to the latest PwC review of the global mining industry that highlighted concentration risk as a driver of deal making activity in the mining sector last year.
The report shows a rise in the geographical concentration of mining reserves and production in recent years, steered by the availability of financing and government policies.
This makes the world’s mineral supply and prices more vulnerable to location-specific headwinds such as natural disasters, wars, social unrest, political or regulatory changes.
Large mining companies have thus been focusing on diversification, such as Australian miner Pilbara Minerals’ acquisition of Latin Resources that diversified its lithium portfolio beyond Australia.
Amid escalating pressure from policymakers to reduce mining’s environmental impact through efficiency, technology-driven mergers & acquisitions are also gaining traction in the global industry, as evidenced by the Weir Group’s $800m acquisition of mining software provider Micromine.
The mounting risk has also seen governments getting more involved in deal making in the mining industry, such as the recent lithium partnership between Chile’s national copper corporation (Codelco) and mining behemoth Rio Tinto.
Governments, including Australia, Canada, Chile, EU members and the US, have also responded to the challenge by developing critical mineral strategies focused on diversifying mining production through exploration.
“The interplay of concentration risk and other megatrends is forging new supply chains, dictating national strategy, inspiring new forms of collaboration and creating new value pools,” reads the report.
Higher costs and rising investment, partly because of the growing need for diversification, took their toll on the world’s largest miners in 2024, resulting in lower profits for the industry.
According to the report, revenues for the top 40 global mining companies, excluding gold miners, were down 3%, while earnings before interest, tax, depreciation and amortisation (ebitda) were down 10% from the previous year.
This made for a muted environment for deals. Outside the gold sector, capital spending was also lower than in 2023 and the number and volume of deals declined, with energy transition minerals accounting for a smaller share of activity than in previous years.
“Targeted and collaborative government regulation and policy will be essential in shaping a sustainable and prosperous global mining sector through 2035 and beyond,” reads the report.
“Resource nationalism will take precedence over optimised supply chains in a geopolitically risky world. We do not believe that the current drive for security of supply will be reversed by 2035.”
In SA, gold mining companies have been on the hunt for copper assets, with many expanding their international footprints in recent years.
In 2022, Harmony Gold acquired the Eva Copper project in Australia for R4.1bn while progressing its Wafi-Golpu operation in Papua New Guinea. Last month, AngloGold Ashanti signed an agreement with Australia’s Kincora Copper that will see the miner invest $25m-$50m in copper exploration over the next seven years.
In 2023, Copper 360 acquired Nama Copper for R200m and the past three years have seen Jubilee Metals adding copper to its portfolio by launching operations in Zambia.
Additionally, Kumba, Africa’s biggest iron ore producer, said earlier this year it was looking for new opportunities in the rest of the continent to shore up its dwindling mineral reserves.
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