The global energy transition was the key driver behind 25 per cent of the top 20 mergers and acquisitions (M&A) deals in mining in 2022, as the industry responded to consumer and shareholder demand for portfolio diversification and sustainability, says GlobalData, a leading data and analytics company.
GlobalData’s report, ‘Mining Industry M&A Deals by Top Themes in 2022’, reveals that energy transition was an essential driver of M&A deal activity in the mining sector due to growing calls for decarbonisation. Global efforts to decarbonise increased the demand for metals like cobalt, nickel, and lithium. These metals are crucial for renewable power and electric vehicle (EV) production, which will play a vital role in the transition to clean energy.
“Mining companies are shifting their portfolios to focus more on future-facing metals. The shortages of these metals and the growth in demand for EVs have prompted M&A deal activity as mining companies consolidate to fill the gap in supply. GlobalData predicts that global EV production will exceed 30 million vehicles by 2031, and mining companies will have to upscale to provide the essential metals required to produce EV batteries and meet demand,” said William Tyson, associate analyst, thematic intelligence at GlobalData.
EV demand and the price of enabling metals are increasing globally, and mining companies are trying to capitalise on this. Government benefits have helped stimulate the demand for EVs, leading to a supply deficit of crucial metals for battery production. However, the subsidies on EVs in many countries will end in the coming year.
“Government assistance through subsidies and tax credits are heavily incentivising the development of green technologies, most notably through the Inflation Reduction Act in the US. Mining companies can benefit from producing the metals that are crucial for the development of green energy and can be rewarded through large subsidies. This has catalysed energy transition-led deal activity in the mining space,” concluded Tyson.