M&A set to take off in mining contractor sector, Grant Thornton says

Grant Thornton has released an inaugural report based on trends, market dynamics and contract models impacting the contract mining industry.

The report, Balancing risk and opportunity in contract mining, revealed stronger balance sheets, which could lead to an increase in merger and acquisition activity.

Will Kendall, Grant Thornton Australia corporate development advisor of mining, said the stronger balance sheet has been a feature of the industry in the past, and there was also an expectation of international entrants playing a bigger role.

“The industry is performing well with solid trading results in recent years allowing debt reductions to build stronger balance sheets,” he said.

“Contractor activity in the coal sector is expected to remain tough however, until the coal market improves and this will see diversification into other commodities as a strategic necessity.”

The firm noted that mining contractors played a crucial role in the mining industry as they supplied capital, labour, equipment and expertise to operate mines safely and efficiently, with responsibilities in risk management, cost control and supplier co-ordination.

Kendall noted the report had identified three key trends affecting mining contractors, such as financial resilience and growth, a new contract model for mining partnerships and the globalisation of Australian mining services.

According to the report and its theme of financial resilience and growth, despite margin pressures, contractors had improved capital efficiency, reduced leverage and increased return on equity, which positioned them for renewed M&A activity and strategic investments.

Kendall said additionally, surplus cash flow had enabled deleveraging and enhanced resilience and return on equity had continued to rise, which reflected disciplined capital allocation.

In terms of new contract models for mining partnerships, it was noted that innovative profit-sharing and joint venture-style contracts had started to emerge.

“Contractors are now contributing capital for mine establishment in exchange for a share of future profits or equity, aligning their interests with mine owners,” Kendall said.

“Further, this type of model is positioned to expand beyond gold, and could soon be applied to other commodities and underground operations.”

New international entrants such as North America, Indonesian and Chinese-backed companies were included within the report as they had increased competition and consolidation.

Kendall said going forward, M&A activity was expected to accelerate with a focus on distressed asset acquisitions, particularly in coal.

This offered deep value opportunities and capital-light vertical integrations focused on civil infrastructure, mineral processing and bolt-on acquisitions of adjacent businesses to enhance capabilities and grow revenue.

“Mining contractors are heading into 2026 facing both significant opportunities and considerable challenges,” he said.

“Competitive landscapes are changing, with shifts in commodity markets, more M&A activity expected, and international entrants redefining the sector.”