By Ketki Saxena
Investin.com -- The gold mining industry appears poised for a new era of consolidation, with explorers and producers looking to capitalize on rising metal prices and expand their exposure to other valuable minerals like copper.
This comes at a time when consolidation within the gold industry lags far behind that of other metals. For example, according to S&P Global (NYSE:SPGI)'s latest report, copper mining deals totaled more than $14 billion in value last year - surpassing gold mining deals. The combined value of gold deals stood at $9.8 billion, representing a 48% decrease from 2021 while M&A activity among copper companies rose by 103%.
M&A can lead to diversification into different metals. For example, the desire for diversifcation was cited as a key reason Newmont's proposal to acquire Newcrest – whose revenue consists roughly of 25% copper. Copper is a key mineral in the global transition to renewable energy, and its demand is expected to outpace supply leading to price surges over time.
Newmont Mining Corp (NYSE:NEM)., one of America's largest gold producers, raised its bid for Australian rival Newcrest Mining Ltd. from $17 billion to $19.5 billion after being rejected earlier this year.
If approved by Newcrest shareholders, this acquisition would represent one of the top 10 biggest metal deals ever made - nearly twice as much as last year's merger between Kirkland Lake Gold Ltd. and Agnico Eagle Mines (TSX:AEM) Ltd., making it also the single biggest takeover in gold mining history.
This move could potentially trigger more M&A activity within an industry that has been highly fragmented compared with others such as iron ore where just ten companies generate almost 70% of global supply; whereas only 28% is generated by the top ten players in gold production.
Despite higher prices over recent years not leading to increased exploration spending across many miners' portfolios, M&A provides opportunities for companies to create shareholder value through increasing production share or replenishing depleting reserves. while reducing costs through economies of scale.