The Scramble for Ounces in the Ground

Mergers and acquisitions are picking up in both the precious metals and base metals miners as majors scramble to guarantee ongoing supply. The combination of reduced exploration due to persistently low metals prices as well as additional demand attributable to the ‘costs of going green’ are leading to a trend of consolidation in the sector. 

Speaking earlier this month, Tom Palmer Australian-born CEO of Newmont argued that environmental concerns would lead to bigger players buying up single asset producers. Last month Agnico Eagle and Kirkland Lake announced a merger of equals, which will see them form the third largest gold producer in the world behind Newmont and Barrick. Proving that it isn’t just the bigger players making moves, on Monday (25/10), Calibre Mining Corp announced their acquisition of Fiore Gold Ltd with production in Nevada and exploration in Washington.  

Gold deposits aren’t the only ones in the cross-hairs, Appian Capital Advisory put their nickel and copper mines in Brazil up for sale earlier this year and have revealed that the assets sparked a very-competitive bidding war from large miners and two car makers. Both mines for sale have proven and probable gold reserves as well as significant potential for further finds with additional exploration in adjacent properties. Significantly, Appian Capital Advisory was willing to sell the base metals, but have kept 35% streaming rights on all gold produced on the property as a part of the final package.

The eventual winning bidder was South Africa-based Sibanye-Stillwater who are continuing to diversify their holdings from Platinum group metals and gold with the US$1 Billion dollar acquisition. With an average gold miners’ all-in-sustaining-costs (ASIC) sitting at approximately US$1100/oz of gold, producers are flush with cash and looking to make acquisitions. Sibanye-Stillwater has been on a battery-metal spree, after picking up lithium projects in Finland and the US earlier in the year.

There is growing recognition from miners that “green metals” are likely to get a boost over the coming decades, with BlackRock’s CEO Larry Fink admitting that the green energy transition is nearly certain to be inflationary. As covered in last week’s news, platinum, and to a lesser degree silver, are going to be squeezed, with green energy requiring six times the amount of critical metals compared with their gasoline-powered counterparts.