(Kitco News) - Miners are going to be pushed into more and more M&A, said Michael Gentile, co-founder of Bastion Asset Management.
On Thursday, Gentile spoke to Kitco Mining.
Gentile is a strategic advisor and director for several companies in the natural resource sector.
The mining sector is on a roll. This year, gold has hit several all-time highs, and copper is up 17%. M&A has been on a tear, too. This year, there's been several big mining transactions: Osino Resources and Yintai in a $368 million deal, and Alamos Gold and Argonaut Gold announcing a $325 million deal. The headline M&A was this week when BHP Group made an unsolicited offer for Anglo American. The price could top $39 billion.
Gentile said M&A is not stopping.
"M&A will absolutely continue," said Gentile. "A bunch of things are driving it. First of all, the scarcity of projects that are shovel-ready and are...in quality jurisdictions are at a record low. It's been a dramatic under-investment in mining and development in the last 10 to 15 years. You've also seen projects that have been built, but most of them have gone wildly over budget, so the cost to build these projects are increasing by the month, by the year, so it's a lot cheaper to buy projects that are almost completely built."
Gentile said the rationale for the Anglo American deal is low valuations.
"In the case of BHP...it's a much cheaper bet, especially with how cheap the stocks are trading. You can buy producing assets...at maybe 30% to 40% of the cost of building one. That's why you're seeing all these shovel-ready projects...getting snapped off the board."
