A recent S&P Global analysis piece looking at Major-Junior M&A activity in the first half of 2020, points to an industry that has been able to withstand the impact of COVID-19 and the related lockdowns and global economic stress. In the first half of the year, there were 45 investments in junior explorers and early-stage projects by juniors, which is the same amount as in the first half of 2019.
Despite a first-quarter downturn in metals prices and deals, which took place as COVID-19 spread across the world, the second-quarter saw a strong recovery in metals prices, helping to motivate more M&A activity, with gold taking center-stage in these deals, followed by the base metals.
Gold’s “safe haven” status was solidified this year as its price rose to record levels, going over $2,000 an ounce in early August. Gold has dominated majors’ investments into the junior explorers for quite some time – with over 55% of all deals in each half-year from 2015 until 2019.
And though the prices for many industrial metals collapsed in the first quarter of 2020, they rebounded slightly as China and others restarted their economies and pushed for strong economic recovery post-lockdown. Fears of medium-term supply crunches and increasing demand helped to spur higher prices here.
Looking at copper, there has only been one new major discovery identified since 2015 (classified with at least 500,000 tonnes of copper in reserves, resources and post production), and so copper producers are also focusing now on early-stage exploration.
S&P Global predicts that through the second half of 2020, majors will either maintain or increase their current levels of investment into the junior exploration companies, either through direct acquisitions or by participating in junior company financings.