The possibility that BHP Group’s takeover proposal for Anglo American last month could trigger a fresh wave of M&A activity in the mining sector raises the question as to whether mining valuations are in danger of overheating.

Yes, according to Investec Securities. The bank comments in a recent report that BHP’s preference for shares over cash is a sure-fire signal. “All share acquisitions traditionally indicate a sector that is getting expensive relative to the broader market,” says mining analyst Nkateko Mathonsi. A cash or cash and share offer would “not necessarily be well received by the market”, she adds...

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