Nothing drives change like necessity.
The $1.4 trillion collapse in the value of mining stocks since 2011 is poised to reshape the industry as all but the strongest companies are squeezed by the lowest commodity prices in six years. Rio Tinto Group and BHP Billiton Ltd. are among the best placed to grab assets sold by rivals desperate to stem losses or pay down debt.
“We would be supportive,” Martin Gilbert, chief executive officer of Aberdeen Asset Management Plc, said in an interview with Bloomberg Television on Tuesday.
Aberdeen has more than $400 billion of funds under management and is the second-largest investor in BHP’s London shares and the fifth-largest holder of Rio’s London stock.
“They are financially reasonably strong and the low-cost producers in the sector, so if there was an opportunity to consolidate, yes, clearly it would make sense to do so,” he said. Rio Tinto and BHP would likely use cash and shares in any potential deal, he added. Aberdeen owns 5.7 percent of BHP’s London shares and 2.9 percent of Rio’s U.K.-listed stock. The two companies are listed in Sydney and London.
The rout in commodity prices, combined with a debt binge in the past decade by mine operators high on surging Chinese appetite for raw materials, means even past titans of the industry are trading at minnow valuations. The Bloomberg World Mining Index has plunged to its lowest since 2004 as Chinese demand falters. Anglo American Plc, worth almost 50 billion pounds ($73 billion) in 2008, is now valued at about 3 billion pounds.
“There are going to be fantastic assets available at distressed prices in the market over the next three to six months,” said Simon Grenfell, co-head of global market commodities at Natixis SA in London.
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