If you're finding it hard to keep up with the frenzy in mining M&A, there's a reason. As Dealogic pointed out on Wednesday,
mining M&A has more than doubled from the same period last year -- from $56.8 billion to $142.5 billion -- pushed along by such moves as Xstrata plc's
$9.8 billion hostile bid for platinum miner Lonmin plc, announced this week. And last year was pretty busy.
On Friday we learned of another move in the long-running battle that occupies center stage in the globally consolidating industry: BHP Billiton Ltd.'s hostile pursuit of Rio Tinto plc with an all-stock offer currently valued at around $137 billion. Rio
may spin off its North American coal business in an IPO, raising cash that could be used to pay down debt it incurred buying Alcan Inc., the giant aluminum producer.
Meanwhile, the debate over the BHP-Rio battle continues. Here's a piece from The Australian arguing that the growth projections Rio offers in rejecting the offer
don't hold water. A big part of the problem: doubts about the validity of a crucial iron ore concession in Simandou, Guinea.
This fight could have a long way to run. It could come down to a shareholder vote sometime after EU regulators rule on a combination, which they're expected to do in November. There's plenty of opposition to the deal (from steel giant ArcelorMittal, among others) which would give the combined companies control of
a third of the world's seaborne iron ore production, according to a Bloomberg piece picked up by the IHT.
As for where it's all headed -- well, never mind the fact that commodity prices have fallen of late, along with the stocks of many mining companies. The prevailing wisdom is that the commodity boom is a long-term trend, driven by demand in the developing world, and that mining companies will keep getting larger as the big ones buy up the midsized ones and different models for vertical integration are tried. A March report from PricewaterhouseCoopers called the trend
superconsolidation, and that seems to describe what's happening. -
Kenneth Klee
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