The global rush to find and secure metals and minerals critical for the energy transition, including lithium, nickel and copper, has lifted dealmaking in North America’s mining sector to the highest levels in decades.
M&A volume reached USD 40.6bn in the year to date (YTD) — the highest since Mergermarket records began in 1995.
A big part is dominated by Glencore’s [NYSE:GLEN] bid in April for Teck Resources [TSX: TECK.A and TECK.B, NYSE: TECK], valued at USD 32bn including debt, which the Canadian miner of copper and steelmaking coal rejected.
But an increasing proportion of M&A is being driven by the hunt to secure electric-vehicle (EV) battery metals such as lithium and nickel in North America, as suppliers aim to lessen their dependence on China. “This is our time,” George Pirie, minister of mines of the Canadian province of Ontario, said at a mining event in June. Ontario has significant lithium reserves in brine reservoirs below dried lake beds and houses several battery-grade nickel projects.
M&A activity in North America’s lithium sector is likely to reach a record high this year as miners scramble to secure deposits of the silver-white metal. Annual demand is expected to grow 22x by 2050, mostly buoyed by EV industry growth, according to BloombergNEF’s 2023 Electric Vehicle Outlook.
Buoyed by Livent’s [NYSE:LTHM] USD 3.85bn merger with Allkem [ASK:AKE] in May, YTD deal volume in North America’s lithium market has already surpassed activity in all previous years except for 2014, Mergermarket data shows.
The number of lithium and nickel deals as a share of total mining M&A in North America reached a peak of 14% this year, a far cry from the typical 2%-3% share early last decade.
Carmakers line up
Even more deals are expected.
For example, Sigma Lithium Resources [TSX-V:SGMA], which owns the Brazilian Grota do Cirilo project that is billed as the largest lithium hard rock deposit in the Americas, is reportedly being circled by Tianqi Lithium [SHE:002466], Ganfeng Lithium [SHE:002460], as well as Tesla [NASDAQ:TSLA].
Other automakers are interested in investing directly in mining projects or companies to bring down the cost of battery cells. Stellantis [NYSE:MTA] agreed to acquire a 11.5% stake in Alliance Nickel in April and Ford [NYSE:F] announced its investment in a nickel-processing plant in Indonesia in March.
“The car companies have been coming closer to the mindset that is appropriate to the mining industry,” said Martin Turenne, president and CEO of Canadian junior nickel mining company FPX Nickel [TSX-V]. “They are [now] seeking... ownership of the mining assets themselves.”
Dealmaking could even lead strategic investors to the bottom of the Pacific Ocean.
Canadian deep-sea minerals exploration company The Metals Company [NASDAQ:TMC] has received interest in its flagship project NORI-D from the electric-vehicle industry, said CFO Craig Shesky. Sitting between Hawaii and Mexico, NORI-D holds inferred resources of 356 million tons of seabed nodules, or tennis-ball sized pieces of rock which contain manganese, nickel, copper, and cobalt —all used to manufacture EVs.
Even more deals are expected.
For example, Sigma Lithium Resources [TSX-V:SGMA], which owns the Brazilian Grota do Cirilo project that is billed as the largest lithium hard rock deposit in the Americas, is reportedly being circled by Tianqi Lithium [SHE:002466], Ganfeng Lithium [SHE:002460], as well as Tesla [NASDAQ:TSLA].
Other automakers are interested in investing directly in mining projects or companies to bring down the cost of battery cells. Stellantis [NYSE:MTA] agreed to acquire a 11.5% stake in Alliance Nickel in April and Ford [NYSE:F] announced its investment in a nickel-processing plant in Indonesia in March.
“The car companies have been coming closer to the mindset that is appropriate to the mining industry,” said Martin Turenne, president and CEO of Canadian junior nickel mining company FPX Nickel [TSX-V]. “They are [now] seeking... ownership of the mining assets themselves.”
Dealmaking could even lead strategic investors to the bottom of the Pacific Ocean.
Canadian deep-sea minerals exploration company The Metals Company [NASDAQ:TMC] has received interest in its flagship project NORI-D from the electric-vehicle industry, said CFO Craig Shesky. Sitting between Hawaii and Mexico, NORI-D holds inferred resources of 356 million tons of seabed nodules, or tennis-ball sized pieces of rock which contain manganese, nickel, copper, and cobalt —all used to manufacture EVs.
Upside potential
Chemicals company Albemarle [NYSE:ALB] operates the only active lithium mine in the US at Silver Peak, Nevada. Five other projects are underway and are likely to gain investor attention.
Piedmont Lithium [NASDAQ:PLL] is developing one in Gaston County, North Carolina that includes a mine and spodumene concentrator. Piedmont believes it has a lot of upside potential based on its net asset value and positive feasibility studies, CFO Michael White said. The USD 1.1bn market cap company, in which South Korea’s LG Chem [KRX:051910] is one of the biggest shareholders, expects its valuation to grow when it starts generating revenue, expected in 2H23.
Other lithium formations in the US include Thacker Pass and Rhyolite Ridge in Nevada, which Lithium Americas [TSX/NYSE:LAC] and ioneer [ASX:INR, NASDAQ:IONR] are developing; the Salton Sea in California; and Smackover in Arkansas, where Standard Lithium [TSX.V/NYSE:SLI] works.
Some are already taking advantage of the heightened investor interest. Lithium Americas announced in May that it would separate its North American and Argentine business units into two independent public companies. The North American business will own the Thacker Pass project.
As Pirie, the minister of mines, put it: “We are sitting on the future EV industry.”
