An avalanche of mining and energy M&A has taken place on the ASX this year

So far in 2023, the value of resource-related M&A on the ASX has already surpassed the total value of M&A activity in the entire year of 2021, driven by thematics such as electrification and decarbonisation, rising commodity prices and the need for resource companies to build scale.

Still, the near term is a little bit of a problem – clouded by rising recession risks, volatile commodity prices and higher-for-longer interest rates. 

The Bloomberg Commodity Index – a widely racked benchmark for the commodities market – hit a fresh 14-month low earlier this week and is down around 25% from June 2022 highs. 

But that’s not enough to stop companies from taking out peers and enhancing their exposure to future-facing commodities like lithium, copper and nickel. In this piece, we’ll recap the M&A activity that’s happened so far in 2023 as well as a few interesting observations.

Resources M&A in 2023

• Allkem (ASX: AKE) – Livent (Merger of equals)

• Newcrest Mining (ASX: NCM) – Newmont

• Chesser Resources (ASX: CHZ) – Fortune Silver

• Breaker Resources (ASX: BRB) – Ramelius Resources

• Oz Minerals (ASX: OZL) – BHP

• New Century Resources (ASX: NCZ) – Sibanye Stillwater

• Norwest Energy (ASX: NWE) – Mineral Resources

• Mincor (ASX: MCR) – Wyloo Metals

• Warrego Energy (ASX: WGO) – Hancock Energy

• Danakali (ASX: DNK) – Sichuan Road and Bridge Group

• Demetallica (ASX: DRM) – AIC Mines

And the ones that are a work-in-progress or attempted takeovers:

• Liontown Resources (ASX: LTR) – Albemarle

• St Barbara (ASX: SBM) – Genesis Minerals 

• Essential Minerals (ASX: ESS) – Tianqi Lithium

Volatility is opportunity

Volatile market conditions have enabled a few lowball offers. As the Liontown Board describes it the “opportunistic timing of Albemarle’s Indicative Proposal, coinciding with recent softness in companies exposed to the lithium sector and the pre-production status of the Kathleen Valley Project.”

Liontown rejected bids including $2.50 per share on 28 March, $2.35 per share on 3 March and $2.20 per share on 20 October 2022. 

Knowing your worth

More often than not – The first takeover bid is not always the best (or last) one. Or better yet, there’s more than one interested party. A few examples of interest include:

Oz Minerals:

• Aug 2022: BHP offers $25.000 per share

• Oct 2022: BHP offers $28.25 per share 

Norwest Energy:

• Jan 2023: MinRes offers initial off-market bid of $0.06

• Jan 2023: MinRes offers revised $0.0741 bid

Warrego Energy

• Sep 2022: Strike offers 25.5 cents per share

• Oct 2022: Hancock Energy offers 28 cents per share

• Nov 2022: Strike increase offer to 32 cents per share

• Dec 2022: Hancock raises offer to 36 cents per share

Proximal acquisitions to build critical scale 

The acquisitions like Newcrest and Newmont, Oz Minerals and BHP, and the proposed Liontown and Albemarle are all about building critical scale with assets that are geographically close.

For example, Oz Minerals’ main copper assets are the Carrapateena and Prominent Hill mine in South Australia. Both mines are located within a few hundred kilometres of BHP’s Olympic Dam. After the acquisition, BHP will have a production profile of more than 2 million tonnes of copper per annum – making it the world’s largest copper miner.

Small cap copper producer AIC Mines made a similar play, in its own right, acquiring Demetallica last November for $36 million. AIC’s Eloise mine and processing facility is located just 4 kilometres from Demetallica’s Jericho copper deposit, enabling a larger resource and operational synergies.