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The top rankings in terms of production by consultants Roskill; also merger and acquisition trends in the industry.Neil Behrmann
Ranked by mine production, Anglo American remains the largest mining company in the world. But Rio Tinto, especially if it succeeds in acquiring North, is fast closing the gap.The latest "Who Owns Who in Mining" compiled by London based Roskill Information Services, estimates that Anglo controlled 7.1% of global mining output in 1999, followed by Rio (4.9%), CVRD of Brazil (3.2%), BHP of Australia (3.2%), Norilsk, Russia (2.2%), Codelco, Chile (2%), Freeport McMoran (US) (1.8%), Phelps Dodge (US) 1.7%, Noranda (Canada) 1.6% and Grupo Industrial Minera Mexico (1.5%). The Russian Alorosa diamond group with stakes in Russia and Angola is ranked eleven.Roskill points out that if it had combined state owned groups into one entity, China, with its vast iron ore industry, would have emerged on top. The consultants note that the gap between Anglo and Rio is closing because of the relative decline in gold production. But Anglo companies are the leaders in gold (45% of all gold produced in the Western world), diamonds, platinum and vanadium. Rio is the biggest producer of titanium and borax; second in zirconium; third largest miner of bauxite and iron ore copper; number five in copper and ranks eight for gold and tin."Rio often claims to be the biggest mining company, using market capitalisation and equity control of production as a measure," notes Roskill. "But we use the RMG model, which avoids the problems of changing stock market values and the difficulties of differentiating between mining and non mining activities such as BHP's large petroleum and steel divisions."Among the 25 largest companies, 19 are based in industrialised nations and six in developing countries, including South Africa.Of the developing nations CVRD followed by Codelco are on top, then OCP and BRPM (Morocco), Debswana and BCL (Botswana), Grupo Mexico and then Indian state producers, SAIL which mines iron ore and Hindustan Copper and Hindustan Zinc. Collectively these companies form the most important regional group accounting for 22% of the production controlled by the 25 largest companies. This share is continuously growing as mine production slowly moves south of the equator into Latin America and South East Asia.The volume of mining mergers and acquisitions fell to US$19.1 billion in 1999 from $25. 7 billion in 1998. But had the Alcan-Algroup and Pechiney three way deal been improved by EU anti-monopoly watchdogs, M & A's would have reached a record $35 billion last year. In the first four months of this year M & A totalled $4.3 billion. Expect more deals, contends Roskill. Mining entities require more capital to cope with the expense of large capital spending, new processes and technology. Share values are relatively cheap and slack minerals prices and conditions over a long period, necessitate restructuring and economics of scale. The trend is to slash exploration expenditure. Investment banks, consultants and advisors are constantly promoting deals to perpetuate their own fee creating industry, notes Roskill cynically. Shareholders, caught in long-standing poor performing shares are happy to receive higher share prices.The biggest M & A deals since 1994 have been Alcoa for Reynolds (aluminium) in 1999 at $4.6 billion; RTZ and CRA in 1995 at $4 billion, Alcoa for Alumax (aluminium) in 1998 at $3.8 billion; Inco and Voisey's Bay (nickel) in 1998 for $3.7 billion; a consortium for CVRD in 1997 for $3.15 billion; Anglo American for Anglogold, in 1998 for $3.1 billion, Newmont for Santa Fe (gold) in 1997 at $2.5 billion, BHP for Magma (copper) in 1995 for $2.4 billion, Battle Mountain for Hemlo (gold) in 1996 at $2.1 billion and Phelps Dodge for Cyprus/Amax (copper) in 1999 for $1.8 billion.
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