Mergers and acquisitions (M&A) activity in the metals and
mining sector may have slowed overall but battery metals deal
activity has begun to accelerate, according to a report by
The total deal value for rare earths and lithium assets was
up by 22% year-on-year in the first half of 2018, with
companies increasingly looking to capitalize on future demand
for electric vehicles (EVs), EY said.
"Mining and metals companies are increasingly excited by the
potential of minerals supply into battery technology, which may
encourage acquisitions and investment into earlier-stage
assets," Lee Downham, EY’s global mining and
metals transactions leader, said.
"To date, we haven’t seen many big [market
participants] moving into this space, and it will be
interesting to see whether companies will be bold enough to
respond to the rise in adoption of battery technology," he
In general, however, global mining and metals deal values
fell by 9.5% year-on-year in the second quarter due to
continued muted appetite for acquisitive growth, EY said.
While deal value in the first half of 2018 was up by 36%
year-on-year, this was largely due to the $18 billion merger
between PotashCorp and Agrium. This was completed in the first
quarter, and represented 45% of deal value in the first half of
the year, the report said.
Steel, coal and gold transactions continued to dominate,
representing 62.5% of deals in the second quarter.
According to EY, the findings indicate that companies in the
sector remain cautious in their approach to deal-making,
although there are signs that firms are beginning to look
toward measured growth through joint ventures and strategic
"Mining and metals companies remain conservative in their
approach to deals, despite a return to stronger balance sheets.
There is still significant caution being exercised in the
allocation of capital to anything other than the most
attractive and low-risk projects," Downham said.
"Portfolio optimization remains a key focus, and investment
into growing the pipeline of future production appears to be
back on the agenda, but not at the risk of stressing balance
sheets," he added. "There is no sign that this caution will
reverse as we see out 2018, and we expect that this will be a
year of expansion primarily through organic investment, rather
than one of seeking long-term acquisitive growth."
Corporates increasingly drove the deal-making agenda in the
first half of 2018, reflected by a wider geographical spread of
M&A beyond China, which has been the epicenter of
deal-making in recent quarters.
China’s share of deal value fell from 16% at
the end of the first quarter to 14% or $5.8 billion overall in
the first half, while Canada accounted for $19.7 billion and
India for $6.3 billion of deal value, EY said, with the two
countries collectively totaling 64% of deal value during the
first half of the year.