Mining firm First Quantum (TSX: FM) has turned down an informal takeover proposal from Barrick Gold (TSX: ABX), the world’s second-largest producer of gold. As the mining industry seeks new avenues for growth, Barrick made attempts to expand its presence in the copper market by approaching First Quantum.
However, First Quantum expressed disinterest in a potential merger and declined to engage in substantive discussions. The news led to a surge in First Quantum’s shares, climbing as high as 13% during trading on Thursday, marking its largest intraday gain since November.
On the other hand, Barrick’s shares slump nearly 3% following the news.
While no formal negotiations are currently taking place between Barrick and First Quantum, it remains uncertain whether Barrick will revive its interest in the future. Both companies have refrained from commenting on the matter.
Mark Bristow, the CEO of Barrick, who assumed the position after his mining company, Randgold Resources Ltd., was acquired by Barrick in 2019, has been vocal about the value-creating potential of deals rather than mere expansion for the sake of size. His unsuccessful hostile takeover bid for Newmont Corp. demonstrated this approach. Notably, recent acquisitions in the copper sector have involved substantial premiums.
Should a deal materialize between Barrick and First Quantum, it would significantly enhance Barrick’s copper mining operations at a time when major industry players are actively seeking to expand their production of this vital metal. BHP Group and Rio Tinto Group are actively pursuing strategies to increase their copper exposure, while Glencore has launched an unsolicited $23 billion takeover bid for Teck Resources Ltd., primarily to gain control of its massive South American copper mines.
This move by Barrick reflects a broader trend of increased interest in dealmaking among the world’s largest mining companies, particularly concerning metals like copper and lithium that play a crucial role in the global economy’s decarbonization efforts.
First Quantum, with its significant copper mining operations, has long been considered an attractive target for acquisition in the mining industry. Notably, the company owns copper, gold, and nickel mines across Africa, Australia, Europe, and the Middle East. Its massive copper mine in Panama, accounting for approximately 1.5% of global copper production, recently resolved a dispute with the Panamanian government after several months of negotiations.
With its copper growth initiative in mind, Barrick recognizes the necessity for gold companies to participate in the race for copper production. Bristow has emphasized the critical role of copper output in the mining industry and launched a $7 billion copper project in Pakistan, aiming for operational status by 2028.
As First Quantum emerges as a potential acquisition target, Barrick’s bid rejection adds to the complex dynamics of the mining industry. Barrick faces challenges in gold production as it grapples with its lowest output levels since 2000, while its competitor Newmont is poised to solidify its position as the largest gold producer through an impending deal with Newcrest Mining.
Information for this briefing was found via Bloomberg and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
