M&A powering up in 2023 amid green energy transition and mobility electrification adoption

Deal activity in mining is shaping up to be electrified in 2023, as the green energy transition and adoption of mobility electrification creates ever-growing demand for critical and battery metals.

While H1 2022 was a robust period for M&A in the metals and mining sector, deteriorating global macroeconomic conditions led to lower transaction levels in the second half, which many pundits forecasted would continue through 2023.

However, as the battery and critical metals market enters the year with lingering production-side challenges, there has already been a hive of deal activity among ASX-listed miners with exposure to these commodities, effectively bucking the forecasted trend.

Mining.com.au has between the start of December and today (9 January) alone reported on some 20 M&A deals in the space that have been inked or announced. This, however, appears to be the tip of the iceberg as more deals continue to be brought to the fore.

Early 2022 was busy for M&A, buoyed by record high prices for some commodities, supply chain constraints, and rising energy transition-related demand, however macroeconomic conditions soured going into the midyear.

A PwC report says at the start of 2022, dealmakers were riding the crest of the best year on record for global M&A in 2021 with more than 60,000 publicly disclosed deals breaking US$5 trillion in value for the first time since M&A records began.

Growing pool of targets to be acquired

S&P Global suggests the souring macroeconomic environment and resulting market volatility will mean buyers will be more cautious in 2023, although these same factors may also expand the pool of assets available to be acquired.

The firm, which provides data and benchmarks to capital and commodity market participants, says global efforts to decarbonise are driving the rollout of technologies that are increasing demand for raw materials. This in turn is bringing about near-term challenges as the increasing consumption is likely to outstrip the industry’s ability to ramp up supply, resulting in metals and minerals deficits as early as 2024.

In order to maintain their production profiles, miners could continue to seek out acquisitions of development or near-term production assets.

rising demand for EV batteries saw global lithium demand in particular continue to grow strongly in the September quarter of 2022

The Department of Industry, Science and Resources’ (DIRS) December 2022 resources and energy report says rising demand for EV batteries saw global lithium demand in particular continue to grow strongly in the September quarter of 2022.

Despite a weakening in global economic conditions, sales, and production of EVs continued their rapid growth trend, with global sales of all types of EVs increasing 40% in the nine months to September 2022. This is compared with the same period in 2021 — with Chinese sales up 110%, European sales up 6%, and North American sales up 27%.

DIRS notes that in the coming years, demand is forecast to rise by over 40%, reaching 1.091 million tonnes by 2024. Despite the spread of new battery manufacturing capacity into Europe and the US, Asia remains the major source of demand for lithium.

Record earnings could power drive for inorganic growth

This demand is also driving the earnings of miners in the critical and battery metals sector, which provide capacity to execute M&A as part of their growth strategies.

As DIRS reports, Australia’s resource and energy export earnings are forecast to set a new record of $459 billion in 2022–23. However, the report notes that earnings are forecast to fall to $391 billion in 2023–24 (still the third highest level of earnings on record), as tepid world demand and an easing in supply disruptions reduce commodity prices.

Lithium product exports in particular are expected to exceed $16 billion in 2022–23, up from $5 billion in 2021–22. This will make lithium the sixth largest export of Australia’s resource and energy commodities.

According to DIRS, global supply chain pressures continue to fall. The Global Supply Chain Pressure Index — a composite measure of cross-border transportation costs, delivery times, and order backlogs — increased slightly in October 2022, but remained more than 75% below the December 2021 peak.

This could mean that should the resource and energy sectors enjoy another record year of export earnings in 2022–23 before dipping, as DIRS forecasts, there may be many more deals to come before activity drops off.

As supply chain woes also abate, commodity prices are expected to fall which will affect the ability of companies to pursue M&A in 2023-24.

Until that happens, it seems deal making is on the rise.

Growing number of battery and critical metals companies inking deals

Mining.com.au has already reported on the growing number of battery and critical metals companies inking deals, with this news service covering some 20 transactions since the start of December (until today).

On 9 January, ASX-listed Patriot Lithium (ASX:PAT) reported it had expanded its North American exploration portfolio with the acquisition of 3 ‘extensive’ lithium prospective land packages in north-western Ontario, Canada.

Today, Essential Metals (ASX:ESS) and Tianqi Lithium Energy Australia (TLEA) executed a binding scheme implementation agreement (SIA) in which the latter will acquire 100% of Essential Metals via a scheme of arrangement. Essential owns the Pioneer Dome Project located in Western Australia and is in close proximity to the Mount Marion and Bald Hill lithium projects.

Also, this month, Mining.com.au reported dual-listed battery materials company Euro Manganese (ASX:EMN) issued 237,077 common shares to energy transition focused company EIT InnoEnergy. The deal is part of a Project Support Agreement entered into by both parties in February 2021 and comes following the confirmation of the third and final investment tranche of CAD$80,606.

Riversgold (ASX:RGL) entered into a farm-in and joint venture (JV) agreement with London-listed mining and resource company Corcel (LON:CRCL) where it can earn up to a 70% interest in the Mt Weld Rare Earth Element (REE) Project, a granted mineral tenement (P34/4489) located 1.4km west-north-west of Lynas Rare Earths’ (ASX:LYC) Mt Weld REO Mine near Laverton in Western Australia.

Belararox (ASX:BRX) earlier this month signed a non-binding terms sheet with Fomo Ventures No1 to acquire the Toro-Malambo-Tambo (TMT) Project in Argentina. The 32,000 hectares project is host to potential large-scale base metal mineralisation and untested porphyry targets within Argentina’s San Juan province.

This news service also reported Pursuit Minerals (ASX:PUR) is on track with its takeover of Trilogy Minerals, with Trilogy raising $8 million and acquiring 4 lithium licences in Argentina as part of the pre-acquisition conditions.

On 29 December 2022, Critical Resources (ASX:CRR) satisfied the condition precedent for the binding purchase and sale agreement with TSX-V listed Power Metals Corp (TSX-V:PWM) to acquire its Gullwing-Tot Lakes property.

A day earlier, Australian manganese explorer Black Canyon (ASX:BCA) reported it had earnt a 75% interest in the Carawine Joint Venture (JV) tenements comprising some 793km-square located in the Eastern Pilbara of Western Australia.

On 22 December, Rox Resources (ASX:RXL) accepted the all-cash takeover offer for Cannon Resources (ASX:CNR) and had received $3.8 million for its more than 8.553 million Cannon shares.

Days earlier, as reported by Mining.com.au, Morella (ASX:1MC) completed requirements under the Sayona earn-in agreement for the acquisition of lithium assets located in the Pilbara.

In mid-December, Koba Resources (ASX:KOB) increased its battery metals portfolio with the acquisition of 2 additional ‘high-quality’ lithium (Li2O) pegmatite projects in Canada.

Meteoric Resources (ASX:MEI) entered into a binding agreement to acquire a tier one ionic clay rare earth element (REE) project in the Minas Gerais State of Brazil.

And in early December, Balkan Mining and Minerals (ASX:BMM) strengthened its Canadian lithium (Li2O) portfolio after acquiring 6 new multi-cell claims totalling 27.05km-square within the Georgia Lake lithium district, while mineral exploration company Great Boulder Resources (ASX:GBR) acquired a 61km-square exploration licence at Gnaweeda, located 10km east of the company’s Side Well Gold Project.

These are just some of the deals this news service has covered and represents only a sample of the deal activity publicly announced on the ASX.

Write to Adam Orlando at Mining.com.au

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Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.