The battery metals sector appears to be somewhat isolated from the recent slow-down in global mining and metals transactions, advisory firm Ernst & Young (EY) said.
EY earlier reported that global merger and acquisition (M&A) transaction values in the mining and metals sector fell by 9.5% year-on-year in the second quarter of 2018, and while deal value in the first half of 2018 was up 36% year-on-year, this was largely owing to the $18-billion merger between PotashCorp and Agrium completed in the first quarter of 2018.
“While global deal volumes have declined year-on-year, the Australian market has been buoyed by the strong global appetite for strategic metals,” said EY Oceania transactions market leader Paul Murphy.
“Lithium has been a hot topic, but where it is really getting interesting is in the potential applications for energy storage and 3D printing such as cobalt, nickel, graphite and vanadium. There is a broader realization of the massive market potential which is already evident in the price performance of these commodities over the past 2 years.”
Murphy said that despite sluggish M&A activity overall, strategic metal prices and deals were accelerating.
The value for strategic mineral assets was up 22% year-on-year in the first half of 2018, as investors increasingly looked to position in minerals critical to new technologies.
“Even the most conservative assumptions for the take-up of storage technologies for mobile applications and flow batteries for networks will require tens of billions of investment over the next decade to meet demand.” Murphy said.
He said despite the popularity strategic minerals are a relatively small part of the market, so steel, coal and gold transactions will continue to dominate, representing 62.5% of the deals in second quarter of 2018.
The findings indicate that companies in the sector remained ever cautious in their approach to deal-making with a leaning towards joint ventures and strategic partnerships for growth opportunities.
“A conservative approach to deal-making remains, despite a return to stronger balance sheets. Dealmakers are focused on the most attractive and low-risk projects in this conservative environment. Through 2018 the sector will be driven by investment, rather than long-term acquisitive growth,” Murphy added.by