Inflation is about a context when more money in the market than the products that can be bought with.Simply, today there is higher demand of food than the money in supply.So you will require more money to buy less and lesser food.Inflation depends on the basic materials like food.
The free economy works on an optimism that the enterprises will able to sell the products to the customers who are temseleves optimistic that they can get consistent supply of money to buy them.If the optimism about the future evaporates then the producers wait with their wares to sell but the customers do not show up.Insecurity is the cause of any recession.
So few pointers for the mining industry:
1. Cost cutting not compromising competitiveness is a way forward.
2. Invest in spurring demand.
3. Rationalise the production so as to work on the stock and respond adequately.
For rest of the pointers write to me at jayantaism@gmail.com
Thursday, June 26, 2008
Sunday, June 22, 2008
New Realities for the Mining Companies
Consolidation of the mining sector through mergers and acquisitions is more inevitable than, perhaps, desirable. The popular feeling is that the stronger companies will be able to do the intensive exploration, do the research and development that is necessary, and also to be able to keep their profits up and share them with the host countries and people.
Today, top 150 mining houses make up less than 4% of the number of industry players but account for 80% of global metals output. As the influence increases due to increased merger and acquisition activity, there will however be an increased need for business monitoring for compliance. Competition also means the middle ground in the industry is being squeezed - large companies on one hand, juniors on the other, but the middle sized companies are being squeezed out of the equation.
The mining field is also changing with emerging markets and companies entering the race and changing the playing field. China and India are leading the charge but have only just begun. The desire for resources in these developing nations is continuing unabated and it is safe to say that metals are playing a major role in driving economic development in all types of economies. The developing nations are seeking the resources and the developed nations are feeling the pinch.
Not so long ago metals were not considered to be drivers in economic development but that is certainly not the case now. This has been a significant change in thinking.
Magnus Ericsson of Raw Materials Group of Sweden says: “This is really important to stress because it was only eight years ago that was questioned. It was thought that development could take place only through hamburgers and services and restaurants and things like that. That is not working in the Europe and the USA.” This change places the resource-rich countries in a strong position to service the developing nations but makes Europe and Japan in particular more vulnerable to being edged out.
It also means that the larger mining companies are well placed to continue to grow, particularly through mergers and acquisitions of smaller and mid-size players with key resource bases, as well as with their major competitors. And it is showing.
Mining industry merger and acquisition activity hit new levels in 2007 and is showing no sign of slowing down in 2008. A new report from PriceWaterhouseCoopers (PWC) says 2008 will be one of super consolidation, with the global credit crunch having little effect on mergers and acquisitions. The report states that in 2007 the number of mergers and acquisitions soared by 69%, from 1732 deals in 2006. The total transaction value was $US158.9 billion, up 18% on the previous year. Both the number of deals and their total value were more than double the level recorded two years earlier in 2005. "The number of mining deals announced in the fourth quarter of 2007 was more than double the level recorded in the corresponding quarter of 2006. The report says mergers and acquisitions are a way for mining companies to overcome record high exploration costs, protracted permitting processes and skills shortages. It points out that more than 90% of all deals involved transactions of less than $US250 million and the number of these doubled in the two years to 2007. In that period, the number of deals worth more than $US1 billion trebled to 25. Mining companies cannot afford to be bystanders in merger and acquisition activity. Deals are a key mechanism for filling the pipeline of development projects, bringing forward new development projects and diversifying corporate portfolios in terms of both commodities and geography. Underpinning these trends is the quest for world scale, resource acquisition and resource diversification. High commodity prices, buoyant market capitalizations and optimism about the industry's long-term growth and profitability, with sustained demand in Asia outstripping fluctuations in western demand, have seen mining companies embarking on ambitious long-term growth strategies.
The major 2007 deal was Rio Tinto's $US43 billion acquisition of Canada's Alcan while BHP Billiton's $US150 billion tilt at Rio Tinto will shatter all previous records, if successful. The report says there has been increasingly significant international moves by Russian and Chinese companies, with the intervention of Chinalco in the battle for Rio Tinto an example. North America, and in particular Canada, was still the primary focus for deals in 2007, with their number more than doubling from 310 in 2006 to 695. In the Asia Pacific, mining merger and acquisitions surged by 72% last year to 634 deals, with the total deal value up 216% to $US35.3 billion.
(Author Dr. Jayanta Bhattacharya, is Professor and Head,Department of Mining Engineering and Center for Educational Technology.Indian Institute of Technology, Kharagpur-721302,India. His home page and personal profile: http://jayantaism.googlepages.com/home, his books: http://jayantaism.tripod.com ,his new book on coal quality :http://jayantaism.tripod.com/coal-quality/ )
Today, top 150 mining houses make up less than 4% of the number of industry players but account for 80% of global metals output. As the influence increases due to increased merger and acquisition activity, there will however be an increased need for business monitoring for compliance. Competition also means the middle ground in the industry is being squeezed - large companies on one hand, juniors on the other, but the middle sized companies are being squeezed out of the equation.
The mining field is also changing with emerging markets and companies entering the race and changing the playing field. China and India are leading the charge but have only just begun. The desire for resources in these developing nations is continuing unabated and it is safe to say that metals are playing a major role in driving economic development in all types of economies. The developing nations are seeking the resources and the developed nations are feeling the pinch.
Not so long ago metals were not considered to be drivers in economic development but that is certainly not the case now. This has been a significant change in thinking.
Magnus Ericsson of Raw Materials Group of Sweden says: “This is really important to stress because it was only eight years ago that was questioned. It was thought that development could take place only through hamburgers and services and restaurants and things like that. That is not working in the Europe and the USA.” This change places the resource-rich countries in a strong position to service the developing nations but makes Europe and Japan in particular more vulnerable to being edged out.
It also means that the larger mining companies are well placed to continue to grow, particularly through mergers and acquisitions of smaller and mid-size players with key resource bases, as well as with their major competitors. And it is showing.
Mining industry merger and acquisition activity hit new levels in 2007 and is showing no sign of slowing down in 2008. A new report from PriceWaterhouseCoopers (PWC) says 2008 will be one of super consolidation, with the global credit crunch having little effect on mergers and acquisitions. The report states that in 2007 the number of mergers and acquisitions soared by 69%, from 1732 deals in 2006. The total transaction value was $US158.9 billion, up 18% on the previous year. Both the number of deals and their total value were more than double the level recorded two years earlier in 2005. "The number of mining deals announced in the fourth quarter of 2007 was more than double the level recorded in the corresponding quarter of 2006. The report says mergers and acquisitions are a way for mining companies to overcome record high exploration costs, protracted permitting processes and skills shortages. It points out that more than 90% of all deals involved transactions of less than $US250 million and the number of these doubled in the two years to 2007. In that period, the number of deals worth more than $US1 billion trebled to 25. Mining companies cannot afford to be bystanders in merger and acquisition activity. Deals are a key mechanism for filling the pipeline of development projects, bringing forward new development projects and diversifying corporate portfolios in terms of both commodities and geography. Underpinning these trends is the quest for world scale, resource acquisition and resource diversification. High commodity prices, buoyant market capitalizations and optimism about the industry's long-term growth and profitability, with sustained demand in Asia outstripping fluctuations in western demand, have seen mining companies embarking on ambitious long-term growth strategies.
The major 2007 deal was Rio Tinto's $US43 billion acquisition of Canada's Alcan while BHP Billiton's $US150 billion tilt at Rio Tinto will shatter all previous records, if successful. The report says there has been increasingly significant international moves by Russian and Chinese companies, with the intervention of Chinalco in the battle for Rio Tinto an example. North America, and in particular Canada, was still the primary focus for deals in 2007, with their number more than doubling from 310 in 2006 to 695. In the Asia Pacific, mining merger and acquisitions surged by 72% last year to 634 deals, with the total deal value up 216% to $US35.3 billion.
(Author Dr. Jayanta Bhattacharya, is Professor and Head,Department of Mining Engineering and Center for Educational Technology.Indian Institute of Technology, Kharagpur-721302,India. His home page and personal profile: http://jayantaism.googlepages.com/home, his books: http://jayantaism.tripod.com ,his new book on coal quality :http://jayantaism.tripod.com/coal-quality/ )
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