BlackRock sees merit in large scale mining M&A

[PERTH] BlackRock would back consolidation among large miners because it would open the sector to generalist investors at a scale that would make it easier to bring on large and complex projects needed for new supply, a said on Wednesday (May 27).

The mining industry has an issue around scale, especially compared with other sectors like technology, said Olivia Markham, portfolio manager at BlackRock.

She was speaking at the Australian Financial Review conference in Perth.

“When you speak to a US 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 said.

“We’ve had a wave of mergers and acquisitions (M&A), but I see merit in more,” she said.

“If there are sensible deals to be done that can make companies bigger, I see merit in doing that,” she added.

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Among major miners, Glencore and Rio Tinto explored a possible merger earlier this year that would have forged a US$240 billion company and tied together Glencore’s marketing business and copper assets with Rio Tinto’s operational expertise to serve fast-growing copper demand.

Rio Tinto walked away saying it could not see sufficient cost advantages for the deal at that time, however there is speculation that Glencore CEO Gary Nagle still holds a candle for the Anglo-Australian miner and may look to reopen talks if the Swiss miner’s share price continues to outpace that of Rio’s.

BlackRock holds stakes in both miners, as well as top global miner BHP. REUTERS