Miners are engaging in plenty of takeover talks despite a tepid year for acquisitions, but few deals will get done without greater clarity on the economy and an ebbing of Covid-19, said the industry’s top dealmaker.

“There’s lots of conversations going on, lots of people exploring new ways to think and new ways to operate,” Dan Barclay, who heads Bank of Montreal’s capital-markets division, said in an interview last week. “The probability of a lot of action is going to be conditional on that economic recovery.”

For years, mining executives including Barrick Gold’s Mark Bristow have been saying that consolidation in the industry is inevitable given the abundance of companies and increasing difficulty of finding new high-grade deposits. That could be a boon for investment banks including BMO Capital Markets, among the most active dealmakers in mining and the No. 1 adviser for acquisitions last year.

Mining companies have been involved in about $52-billion of acquisitions this year, according to Bloomberg data. That’s less than half the value of deals seen during industry consolidation in the mid 2000s and following the end of the financial crisis.

The inability of companies to undertake due diligence amid Covid-19 restrictions and “huge price volatility” in the metal markets have hampered this year’s activity, Barclay said. In the precious-metals sector, given the run-up of gold to record levels, there’s a “value gap between what people think is coming and what they think they’re worth,” he said.

If an economic recovery takes hold and strengthens demand for commodities, Barclay anticipates “a very busy year” ahead for BMO Capital Markets for financings and other transactions. Without that, acquisition activity among miners will echo the relatively slow year seen in 2020.

“We don’t think we’re going to recover to a normal level next year,” he said, “unless we get great clarity on economic recovery or we get great clarity on dealing with Covid.”

‘KICK THE TIRES’
The tentativeness of doing deals is not lost on Sean Boyd, who leads top-10 gold miner Agnico Eagle Mines.

“The inability to get people that do your project evaluation work out to look at things is a big hindrance,” Boyd said by phone. “You need to kick the tires.”

Executives probably feel less pressure to push ahead with consolidation plays “given that the gold price has helped their operations,” Boyd said.

Tom Palmer, CEO of No. 1 gold producer Newmont, said there is certainly a need for consolidation among explorers and developers.

“We have too many single-asset companies or projects and therefore too many management teams and overhead,” Palmer said in a phone interview.

Barclay says another big theme next year, beyond deals, will be increased prominence around environmental, social and governance issues.

“Investors are starting to build a more robust tool kit to think about the overall ESG framework of the industry, and who is doing well and not,” Barclay said.