Mining Week 46/’11: Hard times for emerging market multinationals
November 13, 2011
Top Stories of the Week:
- Vedanta reports disappointing results
- Earnings of the industrial metals miner with many operations in India dropped despite revenue increase of 43% for the half year. Reduced earnings were caused by losses in the aluminium group and by a weak rupee (with 45% of revenue in India).
- Sources: Vedanta results presentation; Financial Times; Wall Street Journal
- Anglo and Codelco battle over Sur
- Only days after Anglo agreed to pay $5.1bln for a 40% stake of De Beers, it decided to sell a stake of its Chilean Sur copper project to Mitsubishi for $5.4bln. The sale has led to disagreement with Codelco, which claims to hold an option on 49% of the total project, not just on Anglo’s share.
- Sources: Anglo American press release; Financial Times; Wall Street Journal
- Caterpillar chooses to produce in USA and Indonesia, buys into China
- Caterpillar is adjusting its geographic footprint by buying a Chinese manufacturer of underground coal mining equipment and by increasing capacity of mining truck manufacturing in Indonesia and the USA. China’s enormous market is still predominantly using equipment from domestic brands.
- Sources: Caterpillar press release 1; Caterpillar press release 2; Financial Times; Wall Street Journal
Trends & Implications:
- Though the results for Vedanta were not met with enthusiasm on the markets, they were in line with the strategy set out by the management in May: growth, long term value, and sustainability. Vedanta currently chooses to increase its market share instead of generating high profits, in the awareness that the current development will for a large part determine which companies will be the emerging market multinationals of the future.
- The fight between Anglo and Codelco over the ownership stakes in the Chilean copper assets is flanked by a fight by Japanese co-investors and traders. Codelco sided with Mitsui to build its 49% stake at a low valuation, but Anglo found a way to get a higher price by selling part of the asset to rivaling keiretsu Mitsubishi.
M&A overview update
The M&A overview of the Business of Mining has been updated with Anglo’s 40% acquisition of De Beers.
©2011 | Wilfred Visser | thebusinessofmining.com