A mining mega-merger amidst a commodity boom - sounds familiar?

Teck Resources has turned from being the one that got away from Glencore to a partner in a “merger of equals” with Anglo American. This will see the headquarters of the combined entity and the management team based in Canada – no wonder Lex concluded the surprise winner in this deal is Canada itself. Rio Tinto is left as the last remaining mega cap mining company headquartered, as well as listed, in London.

Soaring prices driving consolidation
Copper & gold have been booming in recent years – if you bought either two years ago you’d be laughing all the way to the bank, but rising costs make the premium assets of top-tier producers especially valuable. The pursuit of these prizes has seen a number of major deals speculated on or mooted, but today’s announcement of an agreed deal between Teck and Anglo American, presuming it goes ahead, will create a new $50 billion mega-miner. That this new force is going to be headquartered in Vancouver and listed on four markets is a reflection of how much has changed since the heyday of the London market. Nevertheless, in retaining its primary London listing, Anglo-Teck should remain a key constituent of the FTSE100.

Dance of the mining majors
First there was the proposed merger of Rio Tinto and BHP Billiton, pursued through the so-called super-cycle and beyond, then Glencore - Xstrata Glencore’s offer for Teck and BHP’s offer for Anglo, there was speculation of a Glencore merger with Rio Tinto - a cultural nightmare if ever there was one, then speculation about Teck - Rio which came to nothing and now there is Anglo - Teck. Back in 2010 there were five super-majors listed and headquartered in London. In this dance of the mining majors Rio Tinto could be left as the last one standing.

Silver or golden lining?
Meanwhile in the world of gold, a series of deals has left the biggest companies in the world listed respectively in New York, Toronto and Johannesburg. Not one of the top ten is London-listed and the biggest London-listed precious metals plays - Fresnillo and Endeavour – are small fry compared to Newmont, Freeport, Barrick and Anglogold Ashanti. There are however some hopeful signs for the future. The listing and FTSE 100 entry of Greece’s Metlen - an energy and metals play with interests in aluminium and critical minerals, shows that there is still European appetite for London. The announcement that AIM-listed Pan African Resources is moving to the main market, there could be a new FTSE350 gold play to join the ranks of Endeavour, Central Asian, Hochschild & Fresnillo. Meanwhile the longest-listed mining company of them all, Antofagasta plc continues serenely on.

What next for Mining M&A?
Whether or not Anglo-Teck is the end of the story, it is at this stage a vindication of the aggressive restructuring launched by Duncan Wanblad after BHP walked away. The successful separation and IPO of Valterra Platinum in which Anglo sold the last of its stake this week, was one key step forward.  The mooted sales of De Beers and coal remain challenging but with a new strategic combination in sight, may provide less of an overhang on the share price. With the value of some commodities, gold, silver, platinum and copper, continuing to rise, and the regulators yet to get their teeth into this merger, it is unlikely to be the last we hear of mining M&A this year.

Speak to our team
If you would like to discuss the implications of this deal for your company, contact Cardew Group’s Mining & Metals team Robin Walker & Tanya Chikanza. With decades of expertise advising the likes of Lonmin, Rio Tinto, ENRC, Vedanta Resources, Arcelor and Kazakhmys our team has unrivalled experience of cross border M&A and has advised on some of the largest IPOs in the sector. Cardew Group’s integrated approach, combining financial communications, Public Affairs, ESG and Digital, positions us perfectly to advise companies in today’s complex and fast-moving markets.