In photos: The M&A deals that defined the commodity super-cycle
Six transactions that defined the current deal-making landscape
With the $10.4-billion (U.S.) acquisition of Placer Dome Inc., Barrick Gold Corp. became the world’s largest gold producer. Barrick acquired more than a dozen mines from Placer, including Cortez in Nevada (pictured) and Pueblo Viejo in the Dominican Republic. They are now two of Barrick’s five best performing mines. Barrick expects to spend less than $900 to produce an ounce of gold from these mines this year – critical when the precious metal is trading around $1,200 an ounce. Barrick recently found more gold near Cortez, a significant discovery that would boost the miner’s reserves. The company also believes another Placer mine, Turquoise Ridge in Nevada, has the potential to become one of its cornerstone mines.Barrick Gold Corp.
Brazil’s Vale SA paid $19.4-billion to get its hands on giant Canadian nickel miner Inco Ltd. Vale, the world’s biggest iron ore producer, initially planned to hive Inco’s nickel, and its other base metals, off into a separate company. But it never did. Instead, nickel got lost in Vale’s iron ore juggernaut. Today, Vale’s iron ore business is facing headwinds. The price of the mineral is down 70 per cent since 2011, and yet, the company is committed to spending $20-billion to expand its iron ore mine in the Amazon. The company is now looking for ways to raise capital, and has floated the idea of spinning off up to 40 per cent of its base metal business into a new company listed on the Toronto Stock Exchange. It has said it hopes to raise between $30- and $35-billion with the spinoff – an estimate many analysts find questionable. If Vale follows through with its plan, a part of Inco will be back in Canadian hands. Given the dearth of major Canadian companies to hold, investors would welcome a big mining listing in Toronto.Gino Donato/The Canadian Press
Swiss-Anglo company Xstrata PLC paid $18-billion for Falconbridge Ltd., profiting at first from nickel’s historic rise to about $24 per pound in 2007. Xstrata vowed to work with Vale to combine their side-by-side nickel operations in Sudbury, Ont. and realize $500-million in potential cost savings. Those merger talks failed. When Switzerland-based Glencore PLC bought Xstrata in 2013, Glencore tried to broker a Sudbury deal with Vale. Talks failed again. Nickel, which is used to make stainless steel, is now down to $6.30 per pound, 70 per cent from its 2007 peak. Glencore is suffering along with the rest of the mining industry, hit by the steep drop in oil, coking coal and copper prices, making cost savings more relevant than ever.Falconbridge
Rio Tinto PLC’s $38-billion acquisition of Canada’s Alcan Inc. will likely go down as one of the biggest debacles in mining history. The Anglo-Australian company based its 65-per-cent premium to Alcan’s share price on misguided assumptions. First, the company expected the price of aluminum (several ingots of which are pictured here) would continue to climb. Second, it expected the Chinese to buy its aluminum and aluminum ore, or bauxite. Neither happened, and Rio has written down about $30-billion of Alcan’s value. Rio “overestimated the aluminum price” and “underestimated China’s ability to generate electricity, produce bauxite and refine aluminum,” said John Tumazos, an independent analyst who runs his own research firm. China ramped up its production of aluminum and has now almost doubled output since the Alcan takeover. There is a bright side, though. Rio is one of the world’s biggest iron ore producers, and although it is suffering from the 70-per-cent drop in mineral prices, its aluminum business is looking better by comparison. Earnings from its aluminum business more than doubled in 2014 to $1.25-billion. Meanwhile, earnings from its iron ore business declined 17 per cent.John Lehmann/The Globe and Mail
Kinross Gold Corp. spent $7.1-billion (Canadian) on Red Back Mining Inc. to gain control of the Tasiast gold mine in Mauritania (pictured) in 2010 – a year before gold peaked above $1,900 an ounce. Since bullion started plummeting, Kinross has pretty much written down the entire value of the mine. It recently killed plans to expand Tasiast, saying it would not be economical with current gold prices.Kinross Gold Corp.
Barrick borrowed heavily to buy Equinox Minerals Ltd. for its Lumwana copper mine in Zambia (pictured). The $7.3-billion acquisition was part of the gold miner’s strategy to expand into copper. Instead, Barrick has written down the entire value of Lumwana and has been burdened by the debt incurred with the acquisition. Barrick’s new chairman, John Thornton, recently reversed course and said the company’s focus is solely on gold.Equinox - Tim Lofthouse