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During the first half of 2020, M&A activity in the metals and mining industry declined drastically. The activity recovered during the second half of the year. According to PWC, the metals industry continued to see a recovery during the first half of 2021. Activity exceeded that of the first half in 2020, and matched or exceeded the second half of 2020 in terms of volume and value.
Historically, there was a peak in M&A activity about ten years ago in the wake of the economic rebound following the 2008 financial crisis. There was a peak in the number of deals in 2011 and in the value of deals in 2012. After this, the number of deals per year as well as the value has been comparatively flat during 2013-2020 at a lower level. This is, in our opinion, a reflection of the overall metal prices. There is a correlation between metal price and deal values, though with about a lag of one year. As can be read from the graph below, there was a peak in metal prices in 2011 at an index level of 120. Prices have been revolving around a flat trendline of about 75 in 2013-2020.
If metal prices remain at a high level during this and next year, it is logical to assume that the total M&A deal value will follow with about a year or so of lag. If this is correct, 2022 could be a record year for M&A activity. Arctic Minerals might potentially make an exit from the Peräpohja joint-venture project in 2023, which should also be a year with a high M&A total value and valuations. The trend of high metals prices should be a tailwind for Arctic Minerals.
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