Mining’s next two years will be shaped by mergers and acquisitions as producers scramble to replace reserves after a decade of weak investment, veteran resource investor Rick Rule says.
Capital markets have pushed miners to return cash through dividends and share buybacks after the sector’s costly spending spree from 2000 to 2010. That discipline strengthened balance sheets but thinned project pipelines, leaving many majors and mid-tier producers without enough new mines to sustain output.
“The only way that they’re going to be able to sustain themselves, never mind grow, is mergers and acquisitions,” Rule told The Northern Miner’s Western Editor, Henry Lazzenby, last week at the Rule Symposium on Resource Investment in Boca Raton, Fla. “The theme of the next two years in capital markets in mining is M&A, M&A and M&A.”
The shortage of advanced projects could lift takeover interest in copper, uranium and gold developers as supply tightens and mine-building timelines lengthen. Producers can buy permitted or near-build assets faster than they can discover and advance comparable deposits, raising the value of the few projects with scale, sound economics and credible management, Rule said.
Watch the full interview below:
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