• China has signalled an intention to reopen the Australian market to Chinese buyers.
  • Newmont Mining Corporation NYSE:NEM (NEM) signals interest in Australia’s largest gold miner, Newcrest Mining Limited ASX:NCM (NCM)
  • Could large M&A and resource deals be signalling a deeper trend in resources?

Commodity deals on the rise

Following the recent downward trajectory and near halving in the price of Newcastle coal, a small number of Chinese state-owned firms have provided a lifebuoy to Australian coal producers.

The potential reopening of the Chinese market will be a welcome development for Australian coal producers that are contending with a sharp reduction in their revenues.

Australian coal producer stock prices have laboured in 2023. The European markets found more competitively priced supplies and stabilised demand as inventories topped out due to warmer than anticipated weather.

Yancoal Australia Ltd ASX:YAL (YAL) is down 10% this year. Meanwhile, Whitehaven Coal Ltd ASX:WHC (WHC) has retreated almost 18%.

International coal producers will welcome the news of returning international buyers, while Australian firms will be hopeful that the world’s largest commodity importer will permanently open its doors to a dwindling market.


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Gold in the spotlight

The world’s largest gold miner, Newmont Mining Corporation NYSE:NEM (NEM), has floated a purchase of Australia’s largest gold miner, Newcrest Mining Limited. ASX:NCM (NCM).

NCM was higher by over 10% on the news of the $24b takeover, representing a 20% premium to the pre-announcement closing market capitalisation.

NEM is banking on the possible scenario of hotter-than-anticipated inflation and a dovish central bank policy reaction, providing a multi-year tailwind to gold prices.

Global backdrop

Gold and silver prices have been trending sideways for over a month, cryptocurrency prices have followed suit, and Bitcoin recently retreated toward the 20,000 handle.

  • Oil prices increased because a Russian supply squeeze was forecast. They retreated due to a boost in US production. Brent crude oil prices are roughly where they were at the close of 2022.
  • The US dollar is caught between an inflationary rock and a US Federal Reserve policy direction hard place.
  • While the US dollar fluctuates, commodity prices are struggling for direction.

Fork in the road

As global commodity prices tread water, large buyers and impatient producer C-Suites are pre-empting the next price fork in the road.

NEM is pre-empting any significant move in gold prices by tying up a merger beforehand, while Chinese coal buyers are looking to get in while the going is relatively good, intending to tie up long-term purchase agreements in a falling market.

Large buyers are placing their bets; might we expect a commodity price gear change on the horizon?