Rio-Glencore Merge? The Commodity Cycle Is Beating | Australian Markets
The large miners are getting optimistic concerning the future and that’s inflicting them to react predictably with main growth ambitions… Learn on to find how this cycle might play out over the approaching years and concepts on how to take benefit.
You might need seen the headlines final week… Rio Tinto and Glencore secretly contemplated the world’s largest-ever mining deal within the second half of 2024.
Because the AFR put it, the merged entities would have created a ‘$260 billion behemoth’, overtaking BHP because the world’s greatest mining company:
‘Rio Tinto-Glencore merger would surpass BHP in size.’
Mining Memo’s Take
Little question, exercise is selecting up within the mining M&A playground.
Development ambitions are rising…
The world’s greatest miners are optimistic concerning the future, reacting predictably and as anticipated at this level within the cycle.
Final 12 months, BHP introduced a $9.8 billion growth of Escondida, the world’s largest copper mine.
And don’t neglect its $74 billion attempt on Anglo American.
The pivot in direction of growth is underway. And that follows a decade-long drought of underinvestment within the base metals sector.
However as pleasure builds, a new technology of ‘cycle victims’ will emerge.
Corporations falling foul of the boom-and-bust nature of this industry!
You see, the ‘smart money’ was shifting into growth tasks 3-5 years in the past.
In different phrases, on the backside of the cycle.
Again then, acquisitions demanded solely modest premiums, and corporations had entry to ample machinery and labour.
These are the shares I goal at Diggers and Drillers.
Corporations that have been deploying money into acquisitions or developments years forward of circumstances turning bullish.
These counter-cyclical movers might benefit essentially the most because the cycle turns bullish over the following 12-18 months.
Leveraging their growth tasks by ramping manufacturing into rising commodity costs.
However one other strategy at this level within the cycle is to give attention to juniors with undeveloped deposits.
When FOMO hits the markets, the juniors holding shovel-ready tasks might shine vibrant.
So, who would be the consumers of these tasks?
A decade in the past, the world’s largest mining firms confronted huge impairment prices on their property.
They offered off high quality tasks at colossal reductions.
Shut down exploration, laid off workers, and cut mine development.
In the present day, the reverse is underway; they need these tasks back!
And with mega-deals being introduced, steel costs nearing all-time new highs and rumours of a commodity super-cycle underway…
A new period of hypothesis is dawning within the mining industry.
Get set for an thrilling 12 months forward!
However make sure you give attention to the proper firms to maximise the alternatives on this upward leg.
Till subsequent time,
Regards,
James Cooper,
Editor, Mining: Part One and Diggers and Drillers
Commercial:
Will this no-name stock rule the ‘Aussie Mining Boom 2025’?
It’s displaying all of the traits, ambition and foresight that Andrew Forrest’s Fortescue Metals had within the early 2000s.
Market cap simply $270 million.
And a gameplan that’s addressing many of the identical challenges Fortescue Metals Group confronted within the 2000s.
This very small company is about to unlock a very huge deposit.
The most important of its variety IN THE WORLD.
Its potential has arrived from nowhere, busting into ‘Tier 1’ standing and attracting mining behemoths…together with Rio Tinto.
This has all of the makings of a traditional rags to riches story. Click on right here for the total take.
All advice is normal advice and has not taken under consideration your personal circumstances.
Please search impartial financial advice relating to your own scenario, or if doubtful concerning the suitability of an investment.
James Cooper has been a working geologist in mines throughout Australia, Canada, and Africa because the early 2000s. He’s led the operations of tiny explorers by way of to very large producer outfits. He’s seen booms and busts firsthand and he additionally understands the cyclical nature of particular person commodities. For instance, James was proper there when Barrick Gold launched an monumental $7.5 billion takeover bid for Equinox. That was the height of the final cycle.
Along with his background as a geo and finance skilled, he brings a distinctive insight and expertise to Fats Tail Funding Analysis. He writes the broader resource-focused investing letter Diggers and Drillers and the ultra-speculative explorer-focused trading service Mining: Part One.
James’s Premium Subscriptions
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