(Reuters) - Big mining companies, restored to health following the 2015-16 crash, are seeking to rationalize their portfolios and acquire assets in line with heightened focus on the best quality minerals and anticipated demand for battery materials.
But so far activity is sluggish and the focus has been on smaller deals after the damage inflicted by steep commodity price falls, which also hobbled investment.
S&P Global Market Intelligence says grassroots exploration spending is at an all-time low, meaning there is likely to be a lag before smaller companies develop assets the majors would wish to buy.
Exploration spending by major miners has risen, but it has become harder to make discoveries, especially of copper, which is in demand because of its usefulness to both traditional technology and electric vehicles.
For major miners, whose business models tend to be based on bulk, high-volume commodities with clear pricing such as copper are often regarded as the best way to get exposure to the electric vehicle trend.
Below is a list of deals and possible deals.
China, the world’s biggest commodity market, is the most obvious buyer and its needs are changing.
An anti-pollution drive means it wants higher quality iron ore, and aggressive targets on electric vehicles are likely to increase its consumption of minerals including copper, rare earths, aluminum and cobalt.
Industry sources say China Molybdenum, for instance, is on the hunt for acquisitions in a range of commodities, but the projects must be large scale.
BHP, under pressure from activist shareholder Elliott Advisors, said it would exit its underperforming U.S. shale oil and gas business.
It is also considering selling a stake in its Canadian potash mine project.
BHP says copper is the best exposure to the electric vehicle story and it would be willing to sell its nickel operations that could supply the battery market.
At the same time, it has said it is seeking to expand those operations, which could increase their price.
BHP is also expanding production at its Spence mine in Chile, but has begun a sales process to divest Cerro Colorado copper mine, also in Chile.
One of BHP’s smaller operations in South America, Cerro Colorado has been on the block for one year and it is unclear whether the initial interest from some of Canada’s miners still stands.
One of its smaller operations in South America, it has attracted interest from some of Canada’s miners.
Rio Tinto’s Rio Tinto Ventures unit was set up early in 2017 to acquire advanced projects and operating businesses across commodities the group does not yet own.
So far it has bought nothing and Rio has only succeeded in narrowing its portfolio, selling coal and reducing its aluminum and copper assets.
It said in May it was in discussions to sell its interest in Grasberg, the world’s second largest copper mine, to Indonesia’s state mining holding company Inalum.
Rio has also sold its remaining coal operations to buyers including Glencore and Australia’s Whitehaven Coal.
Glencore CEO Ivan Glasenberg is regarded as a compulsive dealmaker, but even Glencore has said it is focusing on brownfield acquisitions, incremental stakes and portfolio rationalization rather than blockbuster M&A.
In March last year, the company increased its control over the zinc market through a deal with Canada’s Trevali in which it sold shares in two companies and helped create the first pure zinc company with wide geographical reach.
Glencore followed up in October with an agreement to buy a further stake in Peru’s largest zinc miner Volcan Compañia Minera (VOL_pb.LM). Zinc is used to galvanize steel used in construction and cars.
Among the major miners, Glencore has the clearest exposure to battery minerals needed for electric vehicles and other new technology.
It also says it wants to expand its agricultural business, raising the possibility of a bidding war for Bunge
Glencore says coal will remain a significant source of fuel, especially in Asia.
It is, however, keen for only the most profitable assets, while other miners are seeking to exit the sector altogether, in line with the global push toward lower carbon energy. Rio is among miners to have sold all its coal assets.
Glencore has put its isolated Rolleston thermal coal mine up for sale, but it entered a bidding war for Rio’s coal assets in Hunter Valley and eventually bought a 49 percent stake in the assets Rio agreed to sell to China’s Yancoal..
South32 has decided to run its South Africa Energy Coal business as a standalone unit and is expected to either float it on the Johannesburg stock exchange or to sell it.
In May it announced it had agreed to buy a 50 percent stake in the Eagle Downs metallurgical coal project in Queensland state from state-owned China BaoWu Steel Group for an upfront payment of $106 million.
Separately, South 32 acquired 17 percent of issued shares in Canada-based lead and zinc producer Arizona Mining, but terminated a forward agreement to buy a further 5 percent of the company.
Anil Agarwal, the chairman of Vedanta, which analysts say has aspirations to be a much bigger player, has bought around 20 percent of Anglo American.
Agarwal says he is acquiring the stake through his family trust, not through Vedanta. He denies he is seeking to take over Anglo American.
Anglo American, like other major miners, is looking at buying stakes in small companies that can provide it with exposure to a wider range of assets.
Its De Beers arm is considering investments in startups.
Another trend is for multiple ownership to spread risk.
Anglo American is likely to sell up to 30 percent of its multi-billion dollar Peruvian copper project Quellaveco to Japanese entities, including Mitsubishi, which already own part of it.
Small cap companies say it is hard to raise funding, especially in the higher risk countries where there are signs of resurgent resource nationalism.
A standout among the smaller players is Kazakhstan-focused copper miner Central Asia Metals, which said in September it would buy Bermuda-based Lynx Resources Ltd in a $402.5 million reverse-takeover deal.
Compiled by Barbara Lewis and Clara Denina; Editing by Mark Heinrich