Mining bosses have warned against plunging into the M&A market and repeating mistakes of the past as forecasts mount that the industry is on the verge of a dealmaking boom.
Rio Tinto chief executive Jakob Stausholm was the most outspoken as he hinted at the experience of his predecessor Tom Albanese, who was ousted from the top job in 2013 after an ill-fated acquisition.
Albanese was blamed for Rio’s $38bn deal for Canadian aluminium rival Alcan in 2007 that contributed to $30bn in writedowns following the metal’s tumble on the markets.
“A lot of deals were made between 2005 and 2012 and a lot of these turned out to be really bad,” Stausholm told the Financial Times.
“Now it feels like things are opening up a little bit . . . but from the Rio Tinto perspective, that’s not that relevant: I have no Fomo or fear of missing out.”
Mark Bristow, the pugnacious South African chief executive of Barrick Gold, agreed, saying it can “happen fairly easily” that the industry overstretches itself again by paying too much for assets.
The debate over whether M&A is about to surge follows the boosting of balance sheets by the big groups in the past decade in an effort to restore returns in the wake of the 2015 commodity crash, potentially creating the firepower for deals.
The expected driver is a desire to snap up supplies of metals critical for clean energy, say investment bankers. Miners think these will be in short supply in the future, forcing up prices as demand outstrips supply.
In this scenario, copper is forecast to be the most hotly pursued commodity as it is used in vast quantities in renewables, power grids and electric cars and will therefore be vital in the move to net zero.