whoever owns the resources owns the world

On a day of doom & gloom and a sea of red, this article is worth a read..........the bit I like most is “Whoever owns the resources owns the world".........HRS is near announcing the outcome of its HOA on 4,200 sqk of Weipa bauxite tenements.........

Monday September 29, 2008
Significant rise in global M&As
By Hanim Adnan and Eugene Mahalingam

THE rate of consolidation among most global aluminium companies via mergers and acquisitions (M&As) has jumped significantly over the past three years.

Last year, the aluminium sector represented 56 transactions worth US$77.3bil of the total 411 disclosed deals worth US$144.7bil in the global metals sector.

The two prominent aluminium deals so far were mining giant Rio Tinto plc’s record US$38.1bil acquisition of Canadian-based primary aluminium and alumina manufacturer Alcan; and United Company Rusal’s (UC RUSAL) three-way US$30bil merger with SUAL and alumina-based Glencore International, which resulted in the formation of the world’s largest aluminium group.

According to PricewaterhouseCoopers (PwC) report Forging Ahead on M&As in the global metals sector, deal making in this sector soared to unprecedented levels in 2007, up 67% from 2006.

The report stated that there was a dynamic shift from steel to aluminium in the latest M&A hotspots in North America.

An analyst with a bank-backed brokerage has aptly put it: “Whoever owns the resources owns the world.

“So it is not surprising that the world’s largest aluminium companies are also the top 10 largest producers of alumina (a hydrated form of bauxite, also called aluminium oxide).

He said the limited supply of bauxite - the raw material for aluminium production - was a factor behind the major consolidation trend of the world aluminium industry.

There are only seven bauxite-rich areas in the world - Western and Central Africa (Guinea), South America (Brazil, Venezueala and Suriname), the Caribbean (Jamaica), Oceania and Southern Asia (Australia and India), China, the Mediterranean (Greece and Turkey) and the Urals (Russia).

The main deposits of high quality bauxite with high aluminium content are already divided among major players while other companies would have to buy alumina on the free market or join forces with deposit owners.

The richest sources of bauxite belongs to UC Rusal at about 3.3 billion tonnes, Rio Tinto (3.2 billion), Companhia Vale do Rio Doce (CVRD) (2.73 billion) and Aluminium Corp of China Ltd (Chalco) (1.92 billion).

Both Alcoa and Alcan, which are among the world’s top aluminium producers, also own bauxite deposits of 1.89 billion and 38 million tonnes respectively.

Recent analyses indicated that Alcoa’s alumina business would produce 19% of the world’s total alumina production in 2007 followed by US Rusal accounting for over 14%, Chalco 12%, Alcan 8%, BHP Biliton 6%, Rio Tinto 4%, and CVRD and Hydro Aluminium at 3% each.

A recent Aluminium Leader newsletter said growing demand for aluminium was fuelled largely by the booming China economy, which consumed a quarter of the world’s aluminium production in 2007.


An interior of Alcom's factory in the Bukit Raja Industrial Estate, Klang.

In addition, the European Union was discussing stricter carbon dioxide (CO2) emission requirements for automobiles which will inevitably boost demand for aluminium.

A kilo of aluminium used as a substitute for heavier metals in the car industry, reduces gas consumption by 8.5 litres and produces 20 kg less CO2 emission.

A 10% reduction in car weight results in a 9% increase in fuel consumption efficiency.

Of late, there is an increasing demand for aluminium in the power, transportation and construction sectors.

http://biz.thestar.com.my/news/story.asp?file=/2008/9/29/business/2110659&sec=business