A major investment firm executive expressed support for large-scale mergers within the mining sector, arguing that bigger companies would attract more mainstream investors and have greater capacity to handle complex projects essential for new supply development.
Speaking at the Australian Financial Review conference in Perth on Wednesday, Olivia Markham highlighted scale as a significant challenge for the mining industry when compared to sectors like technology.
“When you speak to a U.S. generalist investor, they want a large liquid equities to invest in. Bigger companies have better access to capital, they typically trade at a better multiple, and I think within the context of the mining sector, bigger companies have also got the teams and the people to go and build all these complex projects,” she stated.
Markham noted that while the industry has already experienced merger activity, she believes additional consolidation would be beneficial.
“We’ve had a wave of M&A, but I see merit in more,” she commented.
“If there are sensible deals to be done that can make companies bigger, I see merit in doing that,” she continued.
The comments come after two major mining companies, Glencore and Rio Tinto, considered a potential merger earlier this year that would have created a $240 billion entity, combining Glencore’s marketing operations and copper holdings with Rio Tinto’s operational capabilities to meet growing copper demand.
Rio Tinto ultimately declined the proposal, stating insufficient cost benefits at the time. However, industry observers suggest Glencore CEO Gary Nagle remains interested in the Anglo-Australian company and might pursue renewed discussions if the Swiss miner’s stock performance continues to exceed Rio Tinto’s.
BlackRock maintains ownership positions in both companies as well as top global miner BHP.
