Major mining companies have shifted their corporate strategy toward acquiring early-stage projects to benefit from potential growth.

The energy transition has stirred up merger and acquisition activity in the metals and mining sector, and analysts have noted that major miners are showing enthusiasm for junior mining companies amid forecasts of tight supplies of key materials.

Last year, major miners led M&A activity in the sector, with interest in base metals surpassing gold for the first time in four years, according to a report by S&P Global Commodity Insights. Deals have continued in 2023 despite macroeconomic uncertainty, including Rio Tinto Group's acquisition of a 15% stake in Sovereign Metals Ltd. and Lundin Mining Corp.'s deal to acquire 51% of SCM Minera Lumina Copper Chile.

Executives from Albemarle Corp., Rio Tinto and Lundin said during earnings conference calls they are focusing on a growth strategy that includes emerging projects.

"We've been talking about pivoting toward resources from an M&A strategy for a while and then also going a little early stage so we get it on these opportunities earlier when they're not as expensive," Kent Masters, chairman and CEO of Albemarle, said during the company's second-quarter earnings call on Aug. 3.

Early-stage projects are less expensive but also more risky. To manage the uncertainty, Albemarle plans to take a conservative stake and observe a project's development over time, according to Masters.

"Getting our foot in the door, so to speak," the executive added.

The chemicals giant took a 4.9% stake in Patriot Battery Metals Inc., a junior explorer with claims to a spodumene deposit in Northern Quebec. The company also proposed acquiring Australia-based lithium producer Liontown Resources Ltd. in March, but Liontown's board rejected the offer, saying it undervalued the company.

And in July, Albemarle successfully acquired Western Lithium Corp. from Lithium Power International Ltd. "This purchase provides Albemarle with prospective exploration tenements near our Greenbushes spodumene mine," Scott Tozier, Albemarle's executive vice president and CFO, said during the call.

Rio Tinto is also focusing on building its portfolio through smaller acquisitions, Reuters reported on Aug. 1, citing CEO Jakob Stausholm.

This is line with comments Stausholm made Feb. 22 during the company's 2022 earnings call. "I probably much more believe in smaller M&A than big M&A. And I hope you can see [that] with the things we are doing," Stausholm said during the call. "They are all very different, but they all make industrial sense because that's where you actually get value out of M&A, in my view."

Rio Tinto will be acquiring a 57.74% stake in Codelco's Agua de la Falda gold project in Chile with the intention of searching for copper on the land claims, and it recently struck several partnerships with junior lithium explorers in Quebec.

"Last year, we saw a shift to growth with our first forays into M&A in over a decade. But as I have mentioned before, it is not a predetermined budget," Rio Tinto CFO Peter Cunningham said during the company's half-year earnings call held July 26. "If value-adding projects are not ready, then the funds will go back into the capital allocation wheel."

Lundin is focusing on developing land claims from the ground up after the acquisition of SCM Minera Lumina Copper Chile gave Lundin partial ownership of the Caserones copper project in the Vicuña copper district. The area also is home to Lundin's Josemaria project, which it acquired in a deal that closed in April 2022.

"We've assembled a very strategic package of assets in Chile and into the emerging Vicuña district, which we believe puts us in the driver's seat of one of the most prolific emerging copper districts," CEO Peter Rockandel said during Lundin's second-quarter earnings call held on Aug. 3.

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