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The ongoing surge in mergers and acquisitions (M&A) activity in the metals and mining sector is expected to continue into this year, driven by the global energy transition, with industry players targeting critical minerals to align their portfolios with the requirements of the future, Fitch Solutions’ BMI unit reports.

BMI expects to see demand for critical minerals surge, with a number of key markets at risk of going into deficit in the long term.

The growing threat of supply deficits is acting as an incentive for miners to increase the share of critical mineral projects in their asset portfolio, the unit informs.

It highlights a significant uptick in M&A activity within the mining industry in recent years, starting in 2020 and accelerating throughout 2021 and 2022.

In 2023, deal activity remained robust, approaching the highest level in a decade in terms of total deal value.

However, the number of deals remained relatively unchanged from 2022, indicating that individual deals were of higher value in 2023 than in 2022, BMI notes.

Much of the strong M&A activity in 2022 and 2023 was centred around critical minerals, as industry players continue shifting their mining portfolios to bridge the impending supply gap, with copper accounting for 11% of the total deal value last year.

The largest transactions in the industry include BHP’s acquisition of OZ Minerals in May 2023 for $6.4-billion, which boosted the group’s copper and nickel portfolio; and Rio Tinto’s takeover of Turquoise Hill Resources in December 2022, which strengthened the diversified miner’s access to copper resources through greater control over the Oyu Tolgoi project in Mongolia, BMI avers.

In the coming years, it expects mining and metals M&A activity to remain strong, in terms of both deal value and number of deals, as miners continue seeking new growth opportunities within a challenging environment for the development of new projects.

Apart from critical minerals, M&A activity in the gold sector is expected to remain strong, as industry players seek to reduce risks amid high costs and increase their market share in a favourable price environment.

In 2023, notable deals in the gold sector included Newmont’s acquisition of Newcrest in November and Pan American Silver’s acquisition of Yamana Gold in the beginning of the year, BMI points out.

Asia-Pacific and North America will continue to see strong M&A activity this year as lower risks and rich reserves attract investment, BMI states.

In particular, the unit expects Australia to see strong investment in its green metals space, as the country is poised to benefit owing to its rich reserves of critical minerals and government support for mining.

BMI also mentions that, while securing transition metals projects in their portfolios, major mining companies will also continue to focus on reducing their exposure to coal assets.

This year, BHP aims to complete the divestment of the Blackwater and Daunia metallurgical coal mines in Queensland, while Teck Resources is expected to finalise the sale of its steelmaking coal business.