Monsters of Rock: Mining monsters have M and A on their minds in Toronto

Newcrest and Newmont merger chatter in focus as PDAC begins in Toronto
Bloomberg says dealmaking will be a major talking point at major mining convention
Miners close week on high as Goldman adds Rio to ‘conviction list’ on bullish iron ore outlook

One of the world’s biggest and most influential mining conferences will be kicking off over the weekend in Toronto, with producers and explorers the world cover checking into Canada to sell themselves to local and international investors.

The interactions between the top brass of Newcrest Mining (ASX:NCM) and Newmont will be closely watched after the Australian gold giant rejected an all paper $24.5 billion offer from the US gold giant to take it out.

Investors have thrown support behind the NCM board at the previous offer price, but it has opened its doors to Newmont to see if the 6Mozpa Denver-based gold behemoth can return with a better deal.

That takeover, if successful, would be the largest in gold mining history and could take the shackles off an arms race for scale that has gone cold since Newmont and no. 2 global gold miner Barrick buried the hatchet and came to a JV over their Nevada gold mines to kill a hostile takeover bid from the Canadian marauders.

The previous largest deal in gold history was the Newmont buyout of Canadian Goldcorp in 2019.

And its former founder Rob McEwen, now the head of McEwen Mining, said more deals were likely in the current environment.

“There’s some really attractive prices out there right now from a standpoint of putting companies together,” he told Bloomberg this week ahead of the start of the PDAC convention.

Bloomberg reckons there have been US$28b of announced merger and takeover offers in the March quarter so far, largely comprising the vanquished Newmont bid.

Last year’s final quarter topped US$30b, including BHP’s (ASX:BHP) $9.6b cash offer for OZ Minerals (ASX:OZL), which looks like it will close at a shareholder vote on April 13 after experts Grant Samuel stated the deal was “fair and reasonable” today.

Weak recent gold and copper prices impacted company valuations through the second half of 2022, making them more attractive to would be buyers.

Investments at the company and project level, especially from automakers and larger miners, have also been seen.

McEwen’s copper subsidiary recently saw stakes taken out by OEM Stellantis and Nuton, a Rio Tinto owned copper leaching venture, providing access to upside in its Los Azules porphyry project in Argentina.

Miners close week on a high with Rio added to iron ore bull Goldman’s “conviction list”

At the top end of the Australian mining game it’s all smiles this week, with China’s strong economic data helping lift the materials sector to a near 4% weekly gain.

The sector, which largely comprises major resources stocks in the ASX 200, was up almost 0.5% today as Rio and BHP recorded gains.

A more than 1.5% run for Rio Tinto shares came after Goldman Sachs added the miner to its ‘conviction list’, after the investment bank’s commodity forecasters increased their 3-month iron ore price target to US$150/t with prices expected to remain above US$120/t in 2023.

While the big banks are more cautious on iron ore, GS says we are headed for a 43Mt deficit in the first half on stronger steel demand in China and weak seaborne supply.

“We note the recent ongoing recovery in Chinese property sales and uptick in Chinese blast furnace utilisation, steel production and rebar prices. Generally property sales lead starts which drives higher steel demand,” Goldman’s Paul Young and Caleb Heiner said in a client note.

“Furthermore, these dynamics are playing out while iron ore inventories at Chinese steel mills are at their lowest levels since 2016 with mills starting to restock in recent weeks. An improvement in Chinese steel prices and mill margins should also be positive for high grade iron ore.”

They also rate high grade Canadian miner Champion Iron (ASX:CIA) as a buy.

Lithium players Pilbara Minerals (ASX:PLS), Allkem (ASX:AKE) and Core (ASX:CXO) were also in investors’ good books.