Organic Growth Combines with Mergers & Acquisitions to Burn Up Global Metals & Minerals Resource Sector

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Researched by Industrial Info Resources (Sugar Land, Texas)--Historically high commodity prices for metals and minerals, including coal, copper, iron ore and precious metals, spurred on by rising worldwide demand for raw materials, are heating up both organic growth projects and merger and acquisition activity, as cash-happy mining companies look to gobble up prime resource investment opportunities. There's no way to get around it: the world needs resources to meet explosive growth in developing nations and to maintain a high level of demand in developed nations. Iron ore, coal, potash and gold, to name a few, are resources in the Metals & Minerals Industry (MMI) that are in great demand for the building and feeding of nations.

An attractive option for increasing the market share of MMI firms is through acquisitions of strategic assets in hot or emerging demand markets.

Caterpillar Incorporated (NYSE:CAT) (Peoria, Illinois) is a leading example of a company expanding its reach in the resource sector. Last year, the company kicked off construction of more than $1 billion worth of grassroot facilities for the manufacturing of mining equipment and construction machinery. This includes new plants in Texas and North Carolina, and major expansions at plants in Sanford, North Carolina; Aurora, Illinois; Tianjin, China; Channai, India; and Brazil. In addition to the growing number of organic growth projects, the company is acquiring assets. At the end of 2010, Caterpillar announced the acquisition of full-service mining equipment provider Bucyrus International Incorporated (NASDAQ:BUCY) (South Milwaukee, Wisconsin) for $7.6 billion. The Bucyrus deal, which will not be finalized until mid-year 2011, will give Caterpillar a leading market share for underground coal-mining shovels and related material-handling equipment.

There's no doubt that Caterpillar is bullish on international mining/resource markets as the company continues to announce capital expenditures overseas. In January 2011, Caterpillar announced a 650,000-square-foot underground mining equipment plant in Thailand.

Leading North American iron-ore miner Cliffs Natural Resources Incorporated (NYSE:CLF) (Cleveland, Ohio) announced a $5 billion acquisition of Canada's Consolidated Thompson Iron Ore Mines Limited (TSX:CLM) (Montreal, Quebec), growing its presence in iron ore with access to Asian markets.

Vedanta Resources plc (LSE:VED) (London, England), India's largest non ferrous metals and mining company, is attempting to acquire a 60% stake in Cairn Energy's Indian oil and gas subsidiary for about $9 billion. In another deal, Vedanta agreed to pay Anglo American $1.3 billion for zinc mines in Africa and Ireland.

Bucking the trend toward mergers and acquisitions, Vale S.A. (NYSE:VALE) (Rio de Janeiro, Brazil), the world's largest iron-ore producer, announced it wouldn't be making any acquisitions in 2011. But that doesn't mean the company is not spending money on expanding market share. Vale will spend between $26 billion and $28 billion during the next two years to complete projects that are under construction. Expenditures in 2011 will be in the $20 billion range. Industrial Info is tracking 25 active resource projects for Vale worldwide, totaling more than $37 billion.

Freeport-McMoRan Copper & Gold Incorporated (NYSE:FCX) (Phoenix, Arizona) chairperson James Moffet recently said in a conference call that the firm is looking at acquisitions, but the deals would have to be big to catch the company's eye. The company could spend $10 billion over the next five years on organic growth projects, including the reopening of several copper mines in the U.S., now that the price of copper has improved.

Underscoring the importance of strategic resource acquisitions, BHP Billiton Limited (NYSE:BHP) (Melbourne, Australia) has made several unsuccessful attempts to acquire major resource assets recently, including last year's failed $45 billion cash hostile takeover of Potash Corporation (NYSE:POT) (Saskatoon, Saskatchewan).

Nevertheless, 2011 is lining up to be a banner year for both organic growth and mergers and acquisitions activity for players that have ties to a finite amount of resources being sought after by an increasingly small world with an insatiable appetite for growth.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.