Fitch Ratings predicts global mining mergers, acquisition part of global push towards green energy

Fitch Ratings in its new report has predicted that the recent rise in global mining Mergers and Acquisitions (M&A) activity is set to continue into 2024 and beyond as part of the global push towards green energy.

According to Fitch in the report released on Saturday, the financial profiles of miners would remain resilient in the short to medium term as commodity prices remained above mid-cycle levels.

“The rise in M&A activity across the mining industry over the past year is likely to continue into 2024.

“Fitch Ratings expects that strategic repositioning of commodity portfolios to service new demand patterns required by the energy transition and an increasingly challenging environment for the development of new mining projects will drive ongoing corporate activity among miners,” Fitch stated.

This was despite “significant normalisation in prices year-to-date,” which it indicated that would provide financial flexibility for M&A.

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As such, deal activity was on track to reach the highest for a decade this year, with miners experiencing increased financial flexibility as a result of extraordinarily high profits over 2021-2022.

“Changing demand patterns brought about by the energy transition, increasingly lengthy greenfield project construction timelines and limited organic growth options should support deal activity beyond 2023,” Fitch indicated.

“Miners will be particularly active in future-facing metals such as lithium, nickel and copper, where the market is likely to be in structural deficit beyond 2026.”

In addition, the report showed that lower prices in the coming years may also spur further acquisitive activity.

“Lower valuations present strategic consolidation opportunities, particularly in the still fragmented gold sector.

“Lower commodity prices in 2023-2024 will lead to a normalisation of cash flows across the industry but M&A could present opportunities for further synergies among higher-cost, smaller companies and larger diversified firms,” the report indicated.

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