Energy And Mining Mergers: Good, Bad, Or Indifferent?

Investments in fuel minerals and non-fuel minerals by petroleum companies are not a new phenomena. During the past 25 years, oil firms have entered mining via the acquisition route as well as by the direct development of grassroots mines. In the early 1980s, the "merger mania" in the natural resource industries came to a head. Oil company takeovers of mining firms, as well as other mergers between oil producers, captured headlines repeatedly, and speculation ran wild as to who would next acquire whom. Table 1 summarizes leading mining company mergers in the past two decades. There are some special features to the latest round of minerals investments undertaken by oil companies. First, direct takeovers of mining companies have become the preferred means of entry into minerals, with entry from scratch being relegated to the sidelines. This was not always the case. While there are instances of oil firms buying coal and copper companies dating back to the 1950s and 1960s, most of the early minerals work by petroleum firms was from internally generated projects. When the oil companies first became involved in uranium, for example, the uranium mining industry was in its infancy. There was not much market structure to buy, and it was relatively easy for everyone to get into uranium on the ground floor.