Thursday, 11 July 2024

By James Cooper Editor, Mining: Phase One and Diggers and Drillers

Twitter (X): @JCooperGeo

[6 min read]

Dear Reader,

I’ve been a broken record lately, writing about mergers and acquisitions, especially among copper stocks.

Yet, if there’s an investment theme screaming opportunity… You need to know about it!

And I’ve tried to make that crystal clear over the last several months.

So, here we are again…

Earlier this week, Indonesian-owned Mach Metals lobbed a $393 million takeover offer on the small South Australian developer Rex Minerals [ASX:RXM].  

Rex’s flagship project is the IOCG copper-gold Hillside deposit on the York Peninsula in SA. 

Both parties did well to keep this offer under wraps… Rex traded within a narrow 25-27 cent range over the last four weeks.

But when the announcement was released Monday morning, RXM’s opening share price exploded to 44 cents, just shy of Mach’s proposed 47-cent-per-share offer.

That’s an instant 60-plus percentage gain… a nice way to start the week for Rex shareholders!

Kudos to my colleagues Brian Chu and Murray Dawes, whose readers held Rex Minerals in their respective portfolios.

But what’s the bigger picture here?

As long-term readers know, copper stocks’ sudden return to favour has been fueled by a lack of supply.

For too long, the world’s largest miners have shelved exploration ambitions… Repulsed by the enormous capital commitment involved in finding and developing new mines.

But an aversion to growth can only have one outcome… Falling supply. 

This story has taken years to unfold. It’s rooted in the overexuberant investment phase of the last mining boom, which lasted from 2003 to 2012.

In the following years, mining executives received a walloping from shareholders who questioned their ability to read the market.

You see, at the peak of the last boom, many of the world’s largest miners succumbed to buy-out fever.

A war of outbidding other miners to grab hold of juniors that were suddenly in hot demand.

As the graphic below shows, total deals (and their overall value) peaked in 2011/12, the very top of the last commodity bull market. 

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