Recently, World Bank officials pointed out that, as metal prices remain at low levels and financing conditions tighten, the mining industry is set to enter a new wave of consolidation. Speaking in an interview during a conference held in Belo Horizonte, Brazil, Paulo de Sa, Head of Energy and Natural Resources at the World Bank, noted that mid-sized producers will be the main players in this round of mergers and acquisitions. Smaller producers have been wiped out by the sharp drop in prices, while larger producers are striving to achieve growth. Since companies have yet to regain access to bank credit lines, this large-scale structural adjustment aimed at coping with falling prices has not yet taken place. In addition, de Sa believes that, given the slowing growth in Chinese demand, metal prices are expected to stay at their current low levels over the next three years.

Data compiled by Bloomberg show that over the past 12 months, global mining companies have announced a total of $56.3 billion in deals, down from the previous 12-month period’s $100 billion. de Sa pointed out that mid-sized companies may lead mergers and acquisitions—or become acquisition targets for larger, better-capitalized firms that are looking to expand not through exploration or greenfield projects, but rather via M&A deals. However, at present, potential acquisition targets remain hesitant about proposed deals, still pinning their hopes on a rebound in metal prices and stock prices. As one analyst put it, sellers are reluctant to sell at low prices, while buyers typically lack sufficient funds—leaving both sides deadlocked in a stalemate.

Meanwhile, it’s not just mining companies that are anticipating a rebound in commodity prices—such as metals—and a dawn for the industry; even investment banks like J.P. Morgan are shifting away from their previously bearish outlook on the mining sector. Currently, J.P. Morgan has joined the ranks of institutions and funds that are closely watching the mining industry. In a research report released earlier this week, while it recommended only a few specific stocks, it nonetheless assigned an “Buy” rating to the entire mining sector. J.P. Morgan’s view has been backed by prominent investors. Recently, Carl Icahn took advantage of Freeport McMoRan’s downturn to acquire an 8% stake in the company, which faces a heavy debt burden but also boasts top-tier mining assets. George Soros has also purchased a substantial amount of Barrick Gold’s stock, and recently, funds have shown considerable interest in Barrick.

JPMorgan’s bullish outlook on mining companies is straightforward: there’s limited room for further price declines in the future. In recent years, commodity prices have continued to fall, making the mining sector one of the hardest hit industries. JPMorgan predicts that commodity prices will stabilize over the next year or so. Coupled with the substantial downturns earlier, mining stocks have already demonstrated attractive valuation levels. JPMorgan points out that, relative to their previous prices, mining stocks have now returned to levels seen a decade ago—just as China’s supercycle in commodities was beginning to take off. Other institutions have also recently highlighted this point; JPMorgan was among the first to call for a bottoming out, and this is part of the rationale behind its bullish stance on the mining sector. Nevertheless, the prevailing view remains pessimistic. However, the headwinds that the mining industry has long faced are either easing, dissipating, or even reversing. In particular, JPMorgan holds a positive view of China, noting that the recovery in manufacturing and housing sales both indicate a healthy economy. Of course, these indicators have been carefully selected. Meanwhile, construction starts—a metric more directly linked to commodities—have been declining sharply.

For mining companies, capital expenditures have been reduced over the past few years, and valuations are at their lowest level in a decade. JPMorgan pointed out that commodity prices could continue to decline in the future, further eroding corporate profits—but the extent of such declines will be limited. This implies that, in the short term, some mining companies still face the risk of downward revisions in their earnings per share, though the magnitude of these revisions will not be substantial. Recently, the market has unanimously forecast that earnings per share will decline by 44% this year, but such a sharp drop is unlikely to recur in the future.

In addition, JPMorgan has selected several individual stocks—including Norsk Hydro, Rio Tinto, Fresnillo, Randgold, and ThyssenKrupp—while making a conscious effort to avoid heavily wounded large mining companies such as Glencore and Anglo American.