COVID and Investment

Since the onset of the coronavirus (COVID-19) pandemic, the world has changed dramatically and at a significant pace. The world economy has been severely impacted and stock markets have seen substantial falls. The short to medium-term outlook is very uncertain. The impact of COVID on the market and our lives makes a decision regarding future investment difficult.

The impact of the pandemic on company turnover and earnings means many companies will have urgent funding needs, however, those with cash and liquidity will see opportunities emerge. The stock market decline and deteriorating economic conditions will provide a range of attractive opportunities to pick up companies at much lower valuations. The key is to determine the point where the markets have stabilized, and sensible conversations can be had about valuation.

It’s is currently a high-risk time in the investment cycle to be investing, however, there will be opportunities. The economic and social uncertainty and the likely prospect of a recession make proceeding with acquisition and investment opportunities a tough call. Fortune often favours the brave and during the mining downturn from 2012 to 2016 numerous deals were completed that strongly favoured the buyer:

  • Rio Tinto sells Bengalla stake to New Hope
  • Glencore and Bloomfield acquire Vale’s Integra coal mine
  • Western Areas acquire Glencore nickel operations
  • Barrick Gold sells Cowal Gold mine

Some might look back now and consider they did not move quickly or hard enough as the industry rebounded from those difficult times. The second half of 2020 and into 2021 may provide a similar opportunity.

How do investor groups position themselves to make the most of the opportunities that will be presented to them? The first step and most critical step is identifying the potential targets early and start the vendor assessment and due diligence process.

The MEC Advisory team has experienced mining team across a broad range of commodities that encompasses both underground and open-pit mining. We have close affiliations with other groups that allow us to access complementary skills as required. MEC can provide investor groups with a complete ‘one-stop’ technical due diligence on a mining project whether it is in operation or still progressing through the feasibility stages. For those mining projects seeking funding, MEC can also advise and assist them in the work required to position their mining projects where it will be most attractive to investor groups.

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