Consolidation continues to be a major trend in the mining industry, according to interviewees. The drivers of the ongoing trend include the “lack of equity available for junior mining companies”, which stems from a general reported “decrease in liquid investment”, especially for junior mining companies.
This is indicative of the “growing uncertainty in the market”, heightened by the US-China trade war and increasing environmental concerns that have been “putting investors off”. Moreover, there have been significant “difficulties obtaining permission to open new mines” observed by market sources. The culmination of factors has led to companies “restructuring, merging and consolidating to cut costs”.
The consolidation trend will mean some work for the legal market, but it will be competitive since many firms are able to offer M&A experience and transactional support. Interviewees have reported that their work in the mining sector is now as much as 50 per cent M&A. On the other hand, some law firms have chosen to expand their services into energy and infrastructure sectors to offset the lack of mining work available. Others have chosen to rebrand themselves as “a natural resources law firm, and not a mining firm” to remain relevant in the narrowing market.
On a more optimistic note, sources have reported that new robotic technologies are beginning to aid the reopening of abandoned mines, resulting in increased exploration in locations such as southern Spain. This is a positive step for the industry, which has generally been slow to adapt to technological advancements. Currently, mining companies are investing less than 1 per cent of revenue into innovation projects, despite increasing pressure from investors and stakeholders to adapt to modern challenges.
Technological advancement and the consolidation trend share the common aim of cutting costs and optimising processes. There is great scope for mining companies to harness technology to improve their efficiency and reduce environmental impact, which in the long run will attract investors who have been wary of growing environmental regulations. However, until companies in the industry invest in cutting-edge technologies to adapt and optimise, large-scale consolidation continues to be the general strategy for most.