Disciplined Approach to Base Metals M&A

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Commodities, M&A Activity

As base metals reach their cyclical lows, global miner Anglo American PLC considers this the perfect time to scope out M&A opportunities in the base metals sector.

In a presentation at the company’s Base Metals Division Investor’s Seminar on Tuesday, AngloBase CEO Brian Beamish noted that the AngloBase division serves as the largest profit contributor in Anglo American. Although last quarter’s base metal dives might sting some companies, Beamish noted that his division focused on “long life, low costs assets,” particularly copper. To Beamish, current market trends make this the ideal time to acquire more base metal assets and pursue a “project pipeline set to deliver increased production of copper and nickel from 2011 onwards.”

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Photo: Anglo American’s current base metals production for individual commodities, shown in tons. Credit: AngloBase Financial Highlights.

Could base metals M&A become a new trend? As we reported earlier this week, Russian mining companies such as Norilsk Nickel are leading the way for a merger explosion, with a six-way merger in talks. Plus, there’s another potential merger agreement between Furukawa Electric Co Ltd, Japan’s top aluminum producer, and fellow aluminum operation Showa Denko KK. But one analyst told the UK Guardian that more mergers seemed limited for most base metals operations: “I can’t see that happening too much given the nature of the downturn,” opined Neil Buxton, managing director of GFMS Consulting, adding that most companies couldn’t finance such M&A activity. “This is different to previous recessions.”

Some base metals, such as Anglo American’s heavy-hitters zinc and copper, should fare well later this year. However, we have to disagree with the analysts who expect nickel to hit more than $14,500 per metric tons within the next few months. Instead, we expect nickel to stay depressed, and aluminum might have a similar sob story this year. To better understand the markets and their future paths, stay tuned for more metals price predictions from Stuart and Lisa this month. A visit to our free pricing index, MetalMiner IndX(SM), can shed some more light on current prices in several metals markets.

–Amy Edwards

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