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Can M&A momentum continue in mining?

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Shares of Lundin Mining plummeted after the company announced last week it had rejected a number of takeover offers, saying the bids were too low. Some analysts believe the failure of Lundin to find a takeover partner—after scrapping a merger proposal with Inmet Mining and then becoming the target of a hostile takeover attempt by Equinox—is a sign that M&A activity in the mining sector will slow down.

Paul Knight, global head of metals and mining at UBS, is not one of the naysayers.

“There’s a tremendous drive for M&A in mining—the biggest factor I believe is the scarcity value of world class assets in mining,” he tells BNN. “The industry under-invested in exploration if you go back to the 1990s, and it’s only recovering and the industry has not really discovered a lot of mega, tremendous mines as it did in the previous period.”

Knight believes that takeovers are still an attractive strategy for companies to expand.

“All things being equal, it’s more efficient to buy than to build,” he says.
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