A $2 billion acquisition spree by South32 and Gina Rinehart’s Hancock Prospecting has underscored the more upbeat outlook on commodity prices among industry heavyweights, with the scramble to buy or develop world class assets and infrastructure heating up as the world’s largest miners emerge from years of austerity.
Australia’s largest miners have moved aggressively to stamp their dominance in key commodity markets amid expectations of strong Asian economic growth over the next decade, with South32’s $1.7 billion bid for Arizona Mining heralding its intent to be a bigger player in base metals, while Hancock Prospecting’s bold $390 million bid for Atlas Iron could position Australia’s wealthiest woman as a bigger player in iron ore shipments from Port Hedland.
The big miners are slowly opening their wallets after many years of cost cutting and a focus on improving shareholder returns, as management teams look to replace aging mines, maintain production and lay the foundation for future earnings growth.
“All of the miners are faced with the challenge of where does growth come from. There’s not that many shovel-ready opportunities out there,” said South32 chief executive Graham Kerr on the $1.7 billion acquisition of Arizona Mining.
The transition in China’s resource hungry economy towards more value-added industries, coupled with Beijing’s demands for higher quality and less polluting resources, has spurred resource industry giants to invest more in high-grade mines.
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