SMM7 17 / PRNewswire-Asianet / everyone in the market seems to be looking for a copper deal, but even the big producers are unable to increase horsepower production, which is the biggest dilemma facing the mining industry right now.
So what's the problem? People who own copper mines do not want to give up copper production and sales at the moment. Even as Glencore and Anglo American struggled with debt problems during the 2015 commodity price slump, neither company was willing to accept Rio Tinto's unnamed bid for Chile's Coyavasi mine, according to people familiar with the matter. But when it comes to listed companies, they don't have much choice-for example, US-based Freeport and Canada's first Quantum Minerals are the only two truly large copper producers. But when they face the wave of nationalization of global mining resources, it also appears that some of them are at a loss and unable to do so.
"No company with only half its balance sheet will sell copper assets at this time," said Richard Knights, a capital markets analyst at Lippo. The only place they can get value is to develop assets, where they can really grow. "
Despite rising cash reserves, mining companies and their investors will remain wary of expensive deals, as many industries ended up paying a heavy price for overpriced assets during the last commodities boom.
However, the allure of copper resources is irresistible. "there is no doubt that Rio Tinto and larger rival BHP Billiton will consider a big copper deal and they will have to pay for it, but it is also a inevitable path," Richard Knights said.
The following is the case with the world's largest mining companies:
1. Rio Tinto (Rio Tinto):
Rio Tinto is most likely to take advantage of potential deals. At the moment, the company is making more profits, and then it knows what the next strategy is. Rio Tinto has little debt, and there are no big obstacles to development except for a few minor disputes over Mongolia's copper assets. Last week, Rio agreed to sell its stake in the Glasberg copper and gold mines for $3.5 billion, and sales of coal and aluminium are nearing completion this year.
Rio Tinto made offers to Anglo American and Glencore in 2015 to buy a large, lucrative copper mine, according to people familiar with the matter. But it was quickly rejected by two companies, and all three declined to comment.
In an interview last week, Jean-Sebastien Jacques, Rio's chief executive, said Rio was currently "observing" potential mergers and acquisitions and hoped to increase copper production.
Still, the company's interest in big deals is unclear. The world's second-largest mining company may be more inclined to work with partners to make acquisitions, focusing on small acquisitions.
2. BHP Billiton (BHP Billiton):
BHP Billiton has a lot of money and is eager for more copper resources. However, the aggressive management of Elliot, its shareholder, and the $10 billion shale business it is selling have raised public concerns about BHP Billiton. The largest mining company also said big deals were not its priority strategy. Ken Mackenzie, the company's new chairman, said earlier this month that once US oil and gas assets were sold, the company's portfolio would be close to an ideal state.
3. Glencore (Glencore):
Glencore is the world's most acquisitive mining company. The company is currently facing an investigation by US authorities, which could undermine its ability to seek commodity trading. The company will spend $1 billion this year to buy back its own shares to mitigate the impact of the investigation.
4. Anglo American Resources Group (Anglo American):
Anglo American said it would build its own new copper assets and that its board would approve a new $6 billion copper project in Peru. While partner Mishubich will help share the burden of its financing, huge prices make it unlikely that the London-based mining company will make a big acquisition. However, Anglo's copper assets project is likely to generate widespread interest in the market. India's LiveMint reported this month that Anil Agarwal, Vedanta's controlling shareholder, was considering a plan to spin off the mining company's South African assets and set up a new company on its own.
Translated by Zhang Jingye, (SMM) of Shanghai Colored Network
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