Early investors are the first ones to profit from any megatrend.
Inflation… green energy… infrastructure…
Name a megatrend, and you’ll instantly see examples of this.
And mergers and acquisitions (or M&A) are one of the most popular ways early investors multiply their capital.
2023 has already been a successful year for them.
For example, mining M&A activity is up 283% compared to last year, to $66 billion so far.
But across all industries, M&A activity is down 38% compared to 2022.
Mining has been a clear leader in deal-making so far this year.
Below, we will look at several trends taking shape, discuss some of the success stories that have been making headlines… and make suggestions as to where investors should look next.
Inflation: The Trend that Shook the World
Prices have been soaring around the world.
From energy to housing and food… consumers are paying more this year than they did in the past.
Inflation pushed global central banks to raise interest rates.
And created perfect conditions for monetary metals such as gold to spike.
As of writing, gold is trading above $2,000 per ounce. The metal crossed this level back in early April.
Gold mining companies are set to benefit from this trend.
As inflation and other factors, such as the banking crisis in the United States, continue, gold will remain the go-to “safe haven” for millions of investors.
The biggest gold mining companies are on the hunt for acquisitions.
Newmont, the largest gold miner in the world, offered $19 billion for Australia’s Newcrest Mining.
The deal came at a 30% premium to Newcrest’s share price.
And early shareholders were handsomely rewarded.
As a result of the deal, Newmont will expand its global reach and increase its exposure to critical minerals, including copper.
Newcrest shareholders could see more gains ahead…
Copper M&A Is Heating Up
Critical minerals have become a hotspot of M&A activity.
Glencore, one of the world’s largest mining and commodity trading companies, announced a $23.2-billion bid for Teck Resources, a Canada-based diversified miner.
The offer was announced just days after Teck produced the first copper concentrate from its Quebrada Blanca 2 mine in Chile.
It’s not a coincidence. Quebrada is the company’s largest copper project. It’s expected to double Teck’s copper output.
The offer came at a 22% premium to Teck’s share price.
Again, it is a compelling deal for the company’s early investors.
The deal hasn’t been finalized yet. Meanwhile, Teck’s price is up about 20% since the beginning of the year.
More Dealmaking in the Critical Minerals Space
Two lithium producers, Australia’s Allkem and Livent, which is based in the United States, have agreed to merge.
The deal will create a $10.6-billion lithium conglomerate.
Allkem’s shares are up 32% since the beginning of the year, while Livent’s are up 28%.
Meanwhile, the broad S&P/TSX Composite index is up just 6% year-to-date.
The outperformance of the companies involved in the critical minerals M&A is striking.
What should investors learn based on this information?
First, mergers and acquisitions have been massive value drivers. Investors looking for opportunities in early-stage ventures (regardless of the industry) should look out for the “acquisition potential” of the companies they watch.
Second, the recent mergers and acquisitions activity proves that the world’s biggest megatrends continue. Critical minerals, green transition, automation, AI, and inflation continue driving the value of the companies exposed to them.
Here at the Financial Star, we will continue updating you on these and other megatrends. Investors who follow us and notice these megatrends early may enjoy opportunities that the rest of the market will not.
Thank you for your loyal readership,
The Financial Star team