Mid-Tier Mining Ranks Dwindle as Era of Super-Major Miners Dawns

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In the introduction to the BMO Capital Markets Global Metals and Mining Conference in Hollywood, Florida, Head of Mining Research David Haughton noted that most mid-tier mining companies are gone, eventually to be replaced by successful junior miners.

The larger mining companies have been taken out "and many of our favorites are gone," BMO Capital Markets Head of Mining Research David Houghton said Thursday.

In the introduction to the BMO Capital Markets Global Metals and Mining Conference in Hollywood, Florida, Haughton noted that most mid-tier mining companies are gone, eventually to be replaced by successful junior miners.

While cash flows for major mining companies may be very strong, Haughton noted that "the growth in earnings is not really there." BMO suggests that earnings will eventually stagnate on flat commodity prices. Meanwhile, Haughton added, despite the higher commodity prices now being experienced by the sector, limited investment opportunities exist for these companies following years of under investment in exploration. As a result, the current high level of mining M&A levels "are a new phenomenon," he explained.

As a result, the sector may now be witnessing the emergence of super-major mining companies as BHP tries to swallow up rival Rio Tinto to become the super-major in Australia; Vale tries to merge with Xstrata to become the Brazilian-based super-major; Russia's Norilsk seeks its ideal partner to become Russia's super-major; and Anglo American seeks its acquisition target to emerge as Africa's super-major miner.

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