Striking gold: top mining companies and the secret to their success
What is the secret to success? We take a look at some of the global leaders in the mining industry and what it is exactly that makes them so successful.
Mining has reasserted itself in a big way over the past 12 months, with emerging markets such as India to Brazil finding their way into the industry. Here we take a look at some of the top mining companies across the world and how they are finding favour with mainstream investors while quietly increasing revenues and moving technology forward.
Revenues for the Australian-based company almost tripled between 2004 and 2012. The company bases its revenues on metals as well as mining. By revenue alone, it stands as the largest company in all of Australia. Andrew Mackenzie currently serves the company as CEO, following in the footsteps of Chip Goodyear and Marius Kloppers, two men who took the stock price of the company from $8 to $70 in less than three decades.
Much of the success of BHP Billiton comes from its diversification. The company loves to reinvest in its operations around the world and always maintains the cash on hand to follow up on new deposits of natural resources as they are found.. To this end, BHP has oil, coal and other operations in Algeria, Brazil, Canada, Chile, Colombia, Pakistan, Peru, Trinidad and Tobago, the United Kingdom and the United States.
The Rio Tinto Group is a dual British and Australian mining and metals operation with many individual operations focused on particular natural resources. Rio Tinto has perhaps the most complex subsidiary structure of any mining company on this list. The result is a highly specialised operation that has proven successful for the parent company, as each specialty company is able to completely maximise its profitability in bull markets for certain natural resources and metals.
Rio Tinto also negotiates its ownership stake in subsidiaries dependent upon the futures of certain resources, ensuring that there is always liquid cash available for the right mining operation at the right time. Money moves more freely within this company than with any other, and that freedom of resources creates opportunity for the subsidiaries Rio Tinto has in Australia, South Africa, Papua New Guinea, Indonesia, Canada, Madagascar, Chile and Brazil, among many other countries.
Partnership with the Chinese opens up markets for Rio Tinto that are closed to many of its competitors. Chinalco, a state owned Chinese mining company is the major shareholder in the main Rio Tinto company. Although efforts by Chinalco to increase its 18.5 percent stake have been blocked by shareholders and regulators, Chinalco continues to be a major investor in big projects that Rio Tinto takes on. For instance, Chinalco recently invested $1.3 billion in a Rio Tinto iron ore project that is currently taking place in Guinea.
Sam Maurice Cossart Walsh AO currently serves as the CEO of Rio Tinto, taking over from Tom Albanese in 2013.
As the number one mining operation headquartered in Brazil, the Vale Mining Company can lay claim to be the largest nickel and iron ore mining company in the world. Investments in technology specifically catered to nickel and iron ore help Vale corner the market on these two resources, although the company also has many smaller investments in other mining operations including copper, coal, fertilizer and manganese. Brazil and Indonesia house the major operations that Vale undertakes.
Vale prides itself on one of the most thorough exploration operations of any mining company in the world. The Mineral Development Center, located in Brazil, is a laboratory that is geared especially to finding new ways to extract, process and economise ores. It has played a central part in the creation and the exploration of many technologies that have greatly benefited the mining industry as a whole. One particular focus in technological advancements is the development of more accurate and less expensive ways of subsoil drilling and testing rock sample collections for potential deposits.
The logistics structure of the company is also one of the best in the industry. Much of the profitability in Vale comes from its speed in operations, and Vale operates a complete system of railroads, ships and ports alongside its mines in order to ensure a complete infrastructure that can move as quickly as the company requires with no bottlenecks. This infrastructure stretches from Brazil into Indonesia and includes Mozambique, Oman, the Philippines and Argentina. Another income stream comes from the transportation of products for other businesses, and Vale also operates consumer railroads as well in the Vitória – Minas and Carajás Railroads.
Murilo Ferreira is the current CEO of the Vale Mining Company.
Glencore is the third largest family business, quite impressive when you consider that it is also tenth on the list of Fortune Global 500 companies in terms of size. The company headquarters is in Switzerland and was previously known as Glencore International before its merger with Xstrata to create Glencore. Two of the biggest products of Glencore are zinc and copper. The company holds the major market share in zinc with a global share of 60 percent, and a 50 percent share in the copper market trade.
With substantial operations in Zambia, Ecuador, Colombia and the Democratic Republic of the Congo, the company seems to specialise in areas with enough political upheaval to keep others out -even when potential profitability may be high. In order to shore up these investments, Glencore has ownership in the much safer market trading platform globalCOAL and Century Aluminum Co.
Currently, the most important executives in the Glencore company are Tony Hayward, the Chairman, and the CEO Ivan Glasenberg.
Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”