Why Brazilian mining M&As are set to increase

The number of M&A transactions in Brazil’s energy, oil and gas, and mining sectors increased 17% year-on-year to 40 in the first half of this year, driven by the mining segment.

Mining registered 10 deals, compared to two a year ago, according to figures compiled by KPMG.

"The mining sector has been without relevant deals for a long time and with all the issues related to the energy transition and the need for minerals to meet this growing demand, this segment showed more operations and will advance more strongly in the volume of transactions," KPMG partner Paulo Guilherme Coimbra told BNamericas. 

"We have seen a mix of transactions, from companies in the sector buying others, as well as investment funds or companies from other sectors, such as automakers, taking stakes in mining companies to guarantee supply of strategic minerals," said Coimbra.

KPMG’s figures excluded the main deals in the segment so far this year.

In July, Vale announced an accord to sell a 13% stake of its base metals division VBM, which runs nickel and copper operations, for US$3.4bn to Manara Minerals, a JV between Ma’aden and Saudi Arabia’s investment fund. The JV will provide US$2.6bn and US investment firm Engine No. 1 the rest.

POLITICAL LANDSCAPE 

M&As also benefited from a stable political environment. The presidential campaign starting in the middle of last year, culminating in the election of Luiz Inácio Lula da Silva in October, deeply affected M&A and capital market operations.

Lula's administration, meanwhile, announced policies to protect the environment.

"Specifically in the natural resources sector, in the first months of the year, we have seen an increase in the interest of investors from Asia in relation to assets in Brazil and I believe that this is linked both to the result of the electoral process in Brazil and to questions of a stronger climate agenda in the country," said Coimbra.

"Within that, I see a lot of interest in assets in Brazil coming from investors in Japan and China. There is a flow of foreign investors looking at Brazil today who didn't look before," he added.

Coimbra said the M&A scenario will remain positive, since the central bank has started an interest rate reduction cycle, which should encourage companies to start raising funds in the variable income market and advance with asset acquisitions.

ENERGY, OIL & GAS 

Meanwhile, the energy segment registered 19 transactions in the first half, down from 21, while the oil and gas segment posted 11 deals, flat.

"The number of transactions of energy assets has remained practically stable, influenced by the strategy of companies focused on reducing carbon emissions. The oil and gas sector behaved similarly, as companies are reviewing their portfolios," Coimbra added.