In a year marked by operational challenges and postponed capital projects, South Africa's mining sector has seen an unexpected surge in mergers and acquisitions (M&A), particularly within the copper domain.

According to PwC’s recently released 2024 SA Mine Report, the country recorded 32 significant M&A deals totalling around $10 billion (R174bn) between July 2023 and June 2024.

BHP’s abandoned $42.7bn bid for Anglo American could have stirred up M&A activity in SA further.

This striking development comes at a time when major investors were reconsidering new investments due to a variety of local and global factors.

In its report released on Tuesday, PwC has attributed the revitalisation of M&A activity to the broader transformation of South Africa’s mining industry, which is increasingly leveraging its rich mineral resources and dynamic capabilities.

As a result of this, South Africa’s mining sector was now poised “for a future where it leverages its rich, diverse mineral resources and dynamic mining” capabilities.

“Looking ahead, we expect the M&A activity in the South African mining sector to remain robust and dynamic as the industry continues to adapt to changing market conditions and customer preferences. The opportunities and challenges posed by the transition to a low-carbon economy and the emergence of new technologies will also play a role in its development,” noted the report.

Copper has been one of the most prominent drivers of M&A activity in the South African mining sector. Strategic minerals such as copper have become “increasingly sought-after as the world transitions to a low-carbon economy” and as demand for clean energy solutions surges.

During the period under review, AngloGold Ashanti acquired the Northern Junee-Narromine Belt project in Australia from Kincora Copper while Copper360 acquired Nama Copper from Mazule Resources. Ganfeng Lithium, the China-based lithium compound manufacturing and processing company snapped up a 19.9% stake in South African Lithium.

Other deals include African Rainbow Minerals, which acquired the remaining 50% participation interest in its joint-venture that operates the Nkomati Mine from Norilsk Nickel Africa.

“Through this transaction, African Rainbow Minerals secures nickel sulphide orebody and bi-metal product credits, including copper, cobalt, platinum, palladium, and chrome,” said the report.

Menar Capital and Ntiso Investment Holdings, two South Africa-based private investment companies, have also signed a binding agreement to acquire Metalloys manganese alloy smelter from South32 although terms for this transaction had not been disclosed.

Another driver of M&A activity in the South African mining sector has been diversification and strategic realignment by existing miners to create further value. Under this strategy, some SA mining companies have sought to diversify their operations and shore up their balance sheets through disposals and acquisitions.

These include the acquisition of Reldan, a United States-based recycling group, by Sibanye-Stillwater. MC Mining shareholders received an off-market Goldway Capital takeover bid in April this year in a hostile takeover.

According to Vuyiswa Khutlang, the SA Mine project leader for PwC, the higher M&A values and deals in 2024 are in alignment with global trends, driven by the quest for critical minerals essential for the energy transition.

“In South Africa, the deal-critical mineral of focus was copper, whose price performed exceptionally in the current year. The second reason has consolidation and operational synergies and lastly, diversification and strategic realignment,” said Khutland.

Despite the elevated level and value of merger and acquisition activity, prominent mining investors in SA faced challenges during the period under review, which forced them to postpone plans for new projects. Challenges faced by SA mining investors encompassed local challenges and weakening commodity prices such as palladium and coal.

“The investment cuts came against a backdrop of high unemployment, structural challenges and weak economic growth. Mining players were also impacted during the period by the sorry state of the railway network operated by Transnet, port inefficiencies, lack of rolling stock, cable theft, and inadequate maintenance led to companies either stockpiling or scaling down production and laying off workers, given their inability to efficiently move products to export markets.”

BUSINESS REPORT