In the rush of the 2000s commodities boom, the world’s biggest miners earned a reputation as swashbuckling dealmakers, taking on rivals in an onslaught of hostile offers, massive mergers and vicious bidding wars.

Then it all fell apart. A series of disastrous transactions meant balance sheets got shredded, bosses got fired and investors were furious. And so, for the past decade, miners have focused on mining and the mega deals mostly dried up.

But now their penitence is over.

Across the mining world, the appetite for large, transformational mergers and acquisitions has returned, based on multiple conversations with executives at large producers and bankers who advise them. The industry is flush with cash after last year’s record profits, while boards and managers believe they have the support of key investors after promising to avoid the reckless overspending of the last cycle.

No. 1 producer BHP Group is interested in even bigger deals after announcing a $6.4 billion copper purchase last month. Rival Rio Tinto Group is actively looking for lithium acquisitions. Mining and trading giant Glencore Plc is focused on “strategic” opportunities that build on existing connections, its chief executive said last month, while Saudi Arabia’s state mining company last week announced a new venture to invest in overseas assets.

The mining sector is also in the middle of its biggest strategic pivot since the China-led supercycle at the start of this century. The largest producers are at various stages of exiting or winding down fossil fuel operations, while expanding in commodities such as copper, nickel and lithium that will be central to decarbonizing the global economy.

BHP and Rio already got the ball rolling last year, both announcing their biggest deals in years to add more copper.

BHP executives believe the agreement to buy OZ Minerals Ltd. has reestablished its credentials among shareholders — proving the company can get a deal done without overpaying — and paved the way for even larger transactions.

The biggest miner had already expanded its dealmaking team in London and was interested in pursuing a transformational deal, Bloomberg reported last year. The company has recently exited oil and gas and vowed to end thermal coal mining by the end of the decade. To replace those businesses, it’s looking to expand in copper and nickel and grow a fertilizer business.

BHP would be interested in the possibility of deals at the right price with companies such as Canadian fertilizer producer Nutrien Ltd. and US copper giant Freeport-McMoRan Inc., according to some of the people.

Nutrien’s mines and infrastructure surround BHP’s Jansen project — it has long been seen as a natural fit and the companies held talks about a potential partnership two years ago.

Freeport is the world’s largest publicly traded copper producer, at a time when the world’s biggest mining companies are all pushing to expand production.

Another large copper producer — Canada’s Teck Resources Ltd. — is controlled through a dual-class share structure by the Keevil family, but could make an appealing target for one of the big miners if the family were willing to sell or merge part of the business.

The renewed focus on dealmaking comes as the miners themselves are receiving increased attention from both governments and investors, after the uncertainties created by Russia’s invasion of Ukraine helped spur worries about security of supply, driving up commodity prices. Metal markets are tight, with above-ground supplies for several at the tightest in recent history, while China’s reopening from Covid-19 lockdowns is threatening to jolt global demand. Over the longer term, the global drive to decarbonize will be dependent on an ever-increasing supply of natural resources.

Yet the rich valuations, with many miners trading at or near records, could also put a damper on dealmaking unless a wider global recession leads to lower commodity and equity prices. The big producers are also continuing efforts to refine their existing asset portfolios at the same time as they seek growth.

Most of the major miners are also keen to grow output by expanding existing mines or though exploration and building new ones. The industry has been warning for years that there aren’t enough copper projects to meet future demand, and big deals often don’t bring on new production unless fresh capital can be deployed.

Like BHP, Rio Tinto made a big purchase last year, taking full control of Turquoise Hill Resources Ltd. in a $3.2 billion deal. The takeover was messy, with a vote postponed three times as Rio sought to win support from dissident shareholders. However, executives believe it showed investors that Rio can hold its nerve to resist the reckless spending that characterized its past dealmaking.

New Chairman Dominic Barton said at a conference in October that he believed the company had missed opportunities in recent years, in part because of concerns about investors’ reaction because of previous missteps.

Rio’s dealmaking focus has now shifted to lithium. The company has asked the biggest investment banks for pitches on lithium miners and is actively looking for deals.

Glencore, for so long the most aggressive dealmaker in the sector, has been quiet in recent years, instead choosing to sell many of its smaller assets.

Speaking to investors last month, CEO Gary Nagle emphasized that its focus would be on targets where it had existing relationships or shareholdings, or assets that were nearby its existing operations.

“These will be ones that are strategic for Glencore, where Glencore has some sort of strategic advantage, whether it be because we are — have existing shareholding, whether we have existing partnerships with the current owners,” Nagle said. “These will be very strategic M&A opportunities and not simple highest bid wins.”

One area where Glencore sees opportunities is aluminum, which the commodities trader buys and sells for others but does not produce itself. The company has looked in the past at a deal to buy US producer Alcoa Corp. Last year, it held discussions with Noble Group to buy Jamaican alumina refinery Jamalco, but the talks fell apart, people familiar with the matter said.

Still, perhaps the most pressing item on Glencore’s to-do list is to decide the future of its Viterra agriculture business. The company’s options are to merge the business with a rival, sell a stake or an initial public offering.

The large, established producers aren’t the only ones looking for deals. State-backed Saudi Arabian Mining Co., or Maaden, announced a plan last week for a company that will buy minority stakes in international mining assets.

Maaden brings the financial muscle of its biggest shareholder, the Saudi sovereign wealth fund, which is also a partner in the new investment venture and was among the interested buyers of a minority stake in Vale SA’s nickel and copper assets.

Most of the major miners are also keen to grow output by expanding existing mines or though exploration and building new ones. The industry has been warning for years that there aren’t enough copper projects to meet expended demand in the future, and big deals often don’t bring on new production unless fresh capital can be deployed.

“A lot of these guys don’t have much growth and deals are a way to address that,” said Liberum analyst Ben Davis. “The size perspective is key though. It’s going to be hard to do the mega one.”

(By Thomas Biesheuvel, Dinesh Nair and Jack Farchy, with assistance from Archie Hunter, Annie Lee, Jacob Lorinc and Joe Deaux)

Mongolia's coal exports came in at 31.69 million tonnes in 2022, surging 101.72% or 15.98 million tonnes year on year. The export value jumped 134.99% from the year prior to $6.50 billion, showed data from the Mongolian Customs General Administration (MCGA).

MCGA didn't release the specific figure for December, and Sxcoal calculated the shipments at 4.58 million tonnes based on the overall exports published by the administration.

The volume surged 746.57% or 4.04 million tonnes year on year and increased 14.50% or 579,900 tonnes month on month, data showed.

In December, the export amounts totaled $756 million, with the average price calculated at $165.12/t, down $141.50/t year on year but up $8.65/t month on month.

Mongolia exported 29.77 million tonnes of coal to China in 2022, soaring 104.50% year on year, taking up 94% of the total.

In December, exports to China rocketed 795.61% year on year and climbed by 15.81% month on month to 4.40 million tonnes, taking up 96% of the total. The exports were worth $723 million, with an average price of $164.24/t, down $146.17/t year on year but up $9.95/t month on month.

Mongolia's exports of bituminous coal rose 102.34% year on year to 31.36 million tonnes last year; the volume of anthracite was 124,800 tonnes, up 167.12% from a year ago; and other coal exports gained 23.03% from the year prior to 199,400 tonnes.

In December, Mongolia's bituminous coal exports stood at 4.51 million tonnes, jumping 740.76% year on year and climbing 13.49% month on month; it did not export any anthracite, compared with 4,300 tonnes in the year-ago month; other coal exports were 67,900 tonnes, skyrocketing 177.36% from the month-ago level and compared with zero shipment in the same month in the preceding year.

(Writing by Emma Yang Editing by Harry Huo)

For any questions, please contact us by inquiry@fwenergy.com or +86-351-7219322.

On January 17, 2023, Foreign Minister Qin Gang had a phone call at request with Mongolian Foreign Minister Batmunkh Battsetseg.

Qin Gang expressed that under the strategic guidance of the heads of state of both countries and the joint efforts of two sides, China-Mongolia relations have maintained a sound development momentum, with practical cooperation yielding fruitful outcomes and two-way trade registering a record high. The two peoples have also joined hands in fighting the COVID-19 pandemic, gifting one another with sheep and tea. To maintain, consolidate and further develop China-Mongolia relations is the strategic choice of both sides. China is willing to maintain close exchanges with Mongolia at all levels and deepen cooperation in various fields, so as to make new progress in building a community with a shared future for the two countries.

Qin Gang said that China has recently improved and re-calibrated its prevention and control measures in light of the changing situation of the pandemic, including introducing a new entry and exit management policy aimed at facilitating people-to-people exchanges between China and other countries. China appreciates Mongolia's science-based and objective stand and its support for normal people-to-people exchange between the two countries.

Battsetseg said as permanent neighbors connected by mountains and rivers, Mongolia and China are exemplary partners for cooperation in the region and good brothers fighting the pandemic with concerted efforts. Mongolia will, as always, stick to the one-China principle and is willing to strengthen high-level exchanges and deepen pragmatic cooperation with China, so as to make positive contributions to regional and international peace and stability and take the Mongolia-China comprehensive strategic partnership to a higher level.

The two foreign ministers exchanged their New Year greetings as well.

Fix Price, one of the leading variety value retailers globally and the largest in Russia, has entered the Mongolian market this January. The first two Fix Price stores opened in Mongolia’s capital city, Ulaanbaatar, on 13th and 14th of January as part of the chain’s franchise programme.

The selling space of each store is about 250 sq m. The first store is located at 37, Moskva street, while the second one is located at 36, Ard Ayush prospekt. Both stores have a product offering of more than 1,100 SKUs.

Products will be delivered to Fix Price stores in Mongolia by our franchise partner and shipped by trucks from the distribution centre in Novosibirsk.

“Mongolia has become the eighth country where Fix Price stores operate. We hope that Mongolian customers will appreciate the range of products and low prices offered by Fix Price, and we will see more store openings soon. The Company will consider further expansion in the country based on the first performance results”.

Vladimir Pogonin, Store Management Director at Fix Price

As of mid-January, Fix Price has a total of 626 franchised stores operating across its footprint (Russia, Belarus, Kazakhstan, Latvia, Georgia, Kyrgyzstan, Uzbekistan and Mongolia).

Last year, Fix Price was named the most profitable and valuable franchise (in the category with a minimum entry cost of RUB 5 million), according to a ranking compiled by Forbes Russia.

Mongolian President Khurelsukh Ukhnaa’s latest state visit to Beijing placed a heavy emphasis on China-Mongolia economic ties and thus reflected how Mongolia’s foreign policy supports these endeavors. As Mongolia continues to diversify its mining-dependent economy, Beijing, as its comprehensive strategic partner, will continue to play an active role in investments and developmental projects.

On November 28, Khurelsukh held official talks with Chinese President, Xi Jinping. Khurelsukh’s state visit to China marked the second high-level meeting between the two leaders since the outbreak of COVID-19. The official talks between the heads of state not only shed a light on China-Mongolia economic cooperation but also Mongolia’s foreign policy toward China.

Mongolia’s landlocked position naturally forces Ulaanbaatar to maximize trade and economic activities with Beijing. China – as one of Mongolia’s two immediate neighbors, and a major economic powerhouse to boot – necessarily has an outsized impact on Mongolia’s own development.

The two countries’ economic relations have been facing challenges since the border closures amid the pandemic. Despite China’s prolonged zero COVID policy, however, the two counties managed to double their 2021 export levels last year and launched new railway developments, such as the 227-kilometer Zuunbayan-Khangi railroad.

Mongolia’s economic activities showed a positive outlook during the third quarter of 2022, even though China’s zero COVID policy was still in full effect at the time. According to the Mongol Bank, “Economic activity was relatively stronger than expected in the third quarter of 2022, surpassing the pre-COVID-19 levels.”

In December 2022, the same month China finally lifted its harsh COVID-19 restrictions, Mongolia’s coal exports nearly tripled, going from 1,165 to 2,932 tons.

Amid the effort to open borders between Mongolia and China, Beijing requires certain measures to prevent the additional spread of COVID-19. Mongolian tourists and individuals crossing the border to China will need to fill out both paper and online entry forms in addition to showing a PCR test result from within 48 hours of entry.

Meanwhile, as COVID-19 rages through a newly reopened China, Mongolia also has concerns about imported cases. Even though reviving economic activities are a top priority for the Mongolian government, there is no guarantee that those returning will be COVID-free.

During Khurelsukh-Xi meeting, Xi pointed out that China’s development plan includes contributing to the development of its neighbors and China is ready to accelerate projects in Mongolia. Khurelsukh reiterated that Mongolia’s economic plans, the New Revival Policy, and the long-term development policy paper, Vision 2050, can be a parallel development strategy of China’s Belt and Road Initiative (BRI). Mongolia’s envisioned two-step strategy includes bolstering the “trade, investment, finance, mining, energy, infrastructure, e-commerce, and green energy” sectors.

While these talking points may portend a newer direction between Ulaanbaatar and Beijing, the overall China-Mongolia economic relationship is an ongoing effort on Mongolia’s part and its trajectory has not diverged notably from previous administrations. For Mongolia, geography will always dictate the country’s economic goals, but it is the administration of the day that will execute certain economic plans.

Hence, the bolstering of China-Mongolia economic relations is a never-ending endeavor, only with new twists and mega projects.

China, a major export destination for Mongolian minerals, has invested more in the mining sector than any other developing sector, but with parallel growth and development, Mongolia may benefit from major infrastructure projects as long as there is sufficient funding.

In 2013, Mongolia and China established a medium- to a long-term strategy to boost economic relations. One of the major challenges for Mongolia was its incomplete infrastructure, which constrains economic activities, particularly maximizing mineral exports. Hence, since 2013, throughout different administrations, improving the basic infrastructure of Mongolia has always been a major investment opportunity for foreign companies. And China, as a major investor, tends to win major infrastructure procurements.

This might explain why the incumbent prime minister, Oyun-Erdene Luvsannamsrai, has pushed to build infrastructure that supports Mongolia’s exports, even though the most direct beneficiary is the mineral sector. The hope is that better infrastructure will bolster overall growth and feed into long-term plans for economic diversification.

The Oyun-Erdene administration has been placing heavy emphasis on major infrastructure agreements and the start of project construction as one of the leading sources of economic potential for the country. In his latest press release, the prime minister declared Mongolia as “The Year to Travel 2023-2024.”

One of the major policy recommendations is to establish a free-trade zone (FTZ) in government-approved areas to bolster border trade and the development of transit cities and towns such as Zamiin Uud and Erlian. Border trade cities like Erlian survive on Mongolian businesses.

Based on Khurelsukh’s bilateral talks with Xi in November 2022, China will uphold its comprehensive strategic partnership with Mongolia and is willing to bolster the two-step strategy, which can provide parallel growth and development in both societies.

The joint statement issued after the summit touched on important bilateral agreements between the two countries such as the 1994 Agreement on Friendly Relations and Cooperation between Mongolia and the People’s Republic of China, followed by the 2014 Joint Declaration on the Establishment of Comprehensive Strategic Partnership between Mongolia and the People’s Republic of China. Moreover, Khurelsukh-Xi joint statement affirms agreement on and mutual understanding of the significance of continuing the comprehensive strategic partnership, which upholds the people’s interest in the two nations.

Mongolia’s bilateral relationship with China has more economic nuances than political ones. Mongolia’s landlocked position naturally makes it more challenging to access third-neighbor countries. Therefore, Mongolia’s comprehensive strategic partnership with Beijing is a strategic move to maximize the country’s economic potential. With China’s zero COVID policy now in the rearview mirror, Ulaanbaatar will be hoping to maximize gains from the relationship after three years of disruptions.

BY: Bolor Lkhaajav

On Tuesday, Chinese Foreign Minister Qin Gang held phone talks with his Mongolian counterpart, B.Battsetseg, with both sides pledging to enhance pragmatic cooperation.

In recent years, under the strategic guidance of the heads of state of both countries and joint efforts of both sides, China-Mongolia relations have maintained a sound development momentum, with pragmatic cooperation yielding fruitful outcomes and two-way trade registering a record high, Qin Gang said, adding both peoples have also joined hands in fighting the COVID-19 pandemic.

‘To maintain, consolidate and further develop China-Mongolia relations is the strategic choice of both sides. China is willing to strengthen exchanges with Mongolia at all levels and deepen cooperation in various fields so as to make new progress in jointly building a community with a shared future’, he said.

Recently, China has optimized and adjusted its prevention and control measures in light of the changing situation of the epidemic, including introducing new policies aimed at facilitating cross-border travel, said the new Chinese Foreign Minister. He noted that China appreciates Mongolia’s scientific-based and objective stand and its support for normal people-to-people exchange between the two countries.

For her part, Battsetseg said as neighbors connected by mountains and rivers, Mongolia and China are exemplary partners of cooperation in the region and good brothers who work together in fighting the pandemic.

Mongolia will as always stick to the one-China principle and is willing to further enhance high-level exchanges and deepen pragmatic cooperation with China, so as to make contributions to regional and international peace and stability and to push the Mongolia-China comprehensive strategic partnership to new levels, she said.

The Russian Energy Ministry has approved the delivery of Kazakh oil to Germany using the infrastructure run by Transneft, a state-owned pipeline transport company and operator of Russia’s section of the Druzhba pipeline.

Oil transportation company KazTransOil will deliver 300,000 tons of crude in the first quarter of 2023 “in the direction of the Adamova Zastava oil delivery point for further delivery to Germany,” the company’s press service said in a statement on Friday.

The operator added that shipments of this amount of crude are scheduled for the transit of oil from CIS member states through Russia via the system of main pipelines.

Berlin stopped imports of Russian oil via pipelines on January 1, despite the fact that the latest EU embargo exempts piped deliveries of crude to the bloc from the sanctions-hit nation.

Earlier, Kazakhstan’s energy minister, Bolat Akchulakov, said that in 2023, the country would supply 1.5 million tons of oil to Germany with a possible increase of future shipments to 7 million tons.

Transneft spokesman Igor Demin noted that the “volumes that used to flow from Russia to Germany cannot be replaced by Kazakhstan.” He explained that while Russia once shipped up to 20 million tons of oil a year to Germany and another 10 million tons to Poland via Druzhba, Kazakhstan is only able to pump 3-7 million tons.

On December 29, Kazakhstan’s KazMunayGas applied for the transit of 1.2 million tons of oil in 2023 via Russia. Deputy Prime Minister Aleksandr Novak said that Moscow was ready to approve Kazakhstan’s request.

Germany confirmed that the refinery in Schwedt had booked capacity in the pipeline system for Kazakh oil for January onwards. Schwedt is the country’s fourth-largest refinery with a capacity of 11.6 million tons of oil products per year. It supplies 90% of the fuel in Berlin. Russian oil giant Rosneft held a 54.17% stake in the enterprise until last September, when Germany placed the company’s local units in trusteeship, handing control of the refinery to the country’s energy market regulator.

In 2022, Mongolia traded with 160 countries from all over the world, and the total trade turnover reached USD 21.2 billion, of which exports were USD 12.5 billion and imports were USD 8.7 billion.

The total foreign trade turnover increased by USD 5.2 (32.1%) billion, where exports increased by USD 3.3 (35.7%) billion and imports increased by USD 1.9 (27.2%) billion compared to the same period of the previous year. In December 2022, exports increased by USD 259.7 (22.9%) million and imports increased by USD 107.4 (14.8%) million compared to the previous month.

The foreign trade balance was in surplus of USD 3.8 billion in 2022 and increased by USD 1.4 (60.1%) billion compared to the same period of the previous year. Trade balance was in surplus of USD 562.6 million, increased by USD152.4 (37.1%) million from previous month. Trade with China reached USD 13.7 billion in 2022, which is accounting 64.3% of the total trade turnover.

Bituminous coal and copper concentrates accounted for 56.8% and 25.9% of total exports to China, respectively, gold accounted for 99.7% of total export to Switzerland.

The average border price of gold increased by USD 3.3 thousand dollars per kilogram, the average border price copper concentrates increased by USD 119.3 dollars per ton and the average border price of coal increased by USD 8.0 dollars per ton compared to the previous month. However, the average border price of gold unwrought or in semi-manufactured forms decreased by USD 11.4 dollars per barrel.

The bituminous coal export’s volume reached 4.6 million ton, increased by 550.2 thousand tons from the previous month however, value reached USD 756.3 million, and increased by USD 128.5 million from the previous month.

In 2022, 60.6% of the total imports from Russia were petroleum products, 67.3% of the total imports from Japan were cars and 4.3% of the total imports from China were electricity, 10.2% were trucks. The USD 1.9 billion increase in imports from the same period of the previous year was mainly due to USD 369.6 million increase in diesel, USD 170.2 million increase in petrol, USD 191.1 million increase in cars.

Exports of mineral products, natural or cultured stones, precious metal, jewelry and textile articles products made up 97.0 percent of the total export. On the other hand, 74.9 percent of the total imports was mineral products, machinery, equipment and electric appliances, base metals and articles thereof, transport vehicle and its spare parts and food products.

Source: National Statistical Office