Zinifex, Oxiana: Mining M&A Alive and Well

By Paul Baiocchi | March 04, 2008 | 5:11 PM | 0 Comments

On Monday morning in Australia the tape was alive with trading in two of Australia's powerhouse miners as Oxiana (OXR AU) and Zinifex (ZFX AU) agreed to a friendly merger creating one of the world's largest diversified mining companies. Together the companies will carry a value of close to $12 Billion serving the Zinc, Lead, Copper, Silver, and Gold markets. While some are calling it a merger of fierce competitors, Oxiana is calling it a "merger of equals."

Although this deal is significant for both shareholders of Zinifex and Oxiana, it speaks volumes regarding the ongoing climate in the base metals marketplace, highlighted earlier this year when BHP Billiton (BHP) upped its hostile bid for Rio Tinto (RTP).

All of these deals are on a scale largely unseen in the global market in any industry. This points to the values which even the largest of miners represent and the growth opportunities being seen by the biggest and brightest in the industry. While the global reach of all of these companies has now been extended, it is the diverse mix of markets which these companies have access to that should intrigue investors.

Moving forward, merger and acquisition activity should continue to present significant opportunity for investors. And almost no company is safe: it was less than six months ago that Xstrata (XTA LN) bought Australian miner Jubilee (JBM AU), yet Xstrata itself is now being aggressively pursued by Companhia Vale do Rio Doce (RIO).

And even the two companies at the crux of this article move forward in such a situation, as the ink has not even dried on Zinifex's updated offer for Australia's Allegiance Mining (AGM AU).

Thus, if anything is clear now it is that no company with rich resources and strong assets is safe in this environment, and that is a very good thing for investors in the base metals market.