Transcript 19th Industrial Minerals Congress
19
th
Industrial Minerals Congress
Athens , Greece , 3-4/ 2008 11/3/2008 10:46, Draft No 9
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Globalisation and the Industrial Minerals Industry
Vasili Nicoletopoulos Managing Director [Development] Premier Chemicals LLC , USA
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What is Globalisation?
Is it the possibility to have free movement of people, goods, capital & services throughout the globe ?
The movement of billions of dollars around the global financial system
Or is it the homogenisation of all rules, including political and social norms, environmental standards and safety rules?
Affecting people at the bottom of the pile
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Basic Pros and Cons
Proponents :
‘it is the driving force behind growth in the world economy in recent years, as well as the cause of the [associated] commodities boom’
Opponents
[from Stiglitz to Chomsky & Hobsbawm] :
‘it amounts to Americanisation ie dominance of one country , to rising inequalities, and to destruction of the environment’
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Key Questions: Does Globalisation…
Foster Economic Growth?
Benefit the Consumer?
Benefit the Worker?
Benefit the Environment?
Benefit Developing Nations?
Promote Human Rights?
Foster Growth of Democratic Governments?
Improve Quality of Life?
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Globalists’ Arguments…
Accelerates economic growth, increasing standards of living, albeit w/ winners and losers
Benefits the consumer, increasing income, offering a greater variety of lower-priced products and services
Increases employment, wages and helps improve working conditions [e.g. workers’ rights]
Helps clean up and protect the environment: national wealth for environmental improvements
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…Globalists’ Arguments
Helps developing nations: acceleration of economic growth and lifting of millions out of poverty
Helps protection of human rights: economic and political freedom closely linked
Fosters the growth of democratic governments, which have almost doubled worldwide in the last decade
Globalisation and technology result in a quality of life unimaginable 100 years ago. Life expectancy, literacy, human health, leisure and living standards improved dramatically worldwide
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Antiglobalists’ Arguments…
Subjects people to financial crises and poverty in the name of corporate greed
Has resulted in record corporate profit rates while worldwide income gap widens
Results in jobs being shipped overseas to low-wage factories with poor working conditions and abuses of workers’ rights
Exploits local environments in the quest for corporate profit and contributes to worldwide global warming
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…Antiglobalists’ Arguments
Subjects developing nations to severe trade and financial lending practices, keeps nations trapped in debt and poverty
Supports a world trade in human bondage and slavery estimated in the millions
Threatens sovereignty of the nation-state undermining national laws and regulations with power of world trade and finance bodies
Threatens public health, local economies and social fabric of agricultural based societies
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Analysis…
Started as internationalisation of commerce in goods: an ancient and evolutionary phenomenon
Then came transport and communications technologies
… followed by freer movement of capital, labor and services
In modern times, US [+UK] the driving forces
Collapse of communism
An excellent period of economic growth, esp ’02-’07
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Seven New Factors Eased Globalisation …
1.
2.
3.
4.
Institutions, like the EU w/ now 27 members [+4 candidates] and most policies originating in Brussels :environmental, social, health and safety, antimonopoly, antidumping, R&D, financing Information globalisation :internet, e-mail, search engines, data bases, e-press, mobiles, Google Earth Energy developments: demand/prices at a high point, ex Comecon pay @ market rates, links w/ environment Environmental globalisation: greenhouse emissions
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…Seven New Factors Eased Globalisation
5. New finance tools and mechanisms: euro, stock exchanges themselves globalised & on-line, new financial schemes eg options/ real options / derivatives, mathematics and computers software/hardware 6. The role of BRIC as suppliers and consumers : a shift in the global economy’s centre of gravity 7. International organisations: lobbying groups, environmental NGOs
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But Recently = ? …
Partial return to so called ‘protectionism’?
Davos ’08: ‘struggle for the 3 basic commodities - food, energy and water’ Australia may probe Chinese move on Rio Tinto Reform fatigue in the new [+some old] EU member states Markets in turmoil, looking for decoupling [=deglobalisation?] Talk of ‘a new type of stagflation’ New powers: ‘Americanisation’ gives way to Multipolarism . Many of the world class companies of the future will come from the ‘new economies’ rather than the ‘new economy’
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…But Recently = ?
The role of BRIC as investors: FDI from China in Africa w/ Chinese companies searching for raw materials Costs of food and energy rising fast : biggest long-term driver is growing wealth in China and India Environmental [sustainability] problems , worldwide Increase in transport costs
Increasing role of sovereign wealth funds* and [in the other end of the scale] of individuals such as Soros & Buffet
Subprime > credit squeeze, $/euro, energy and food prices
Global financial system now so complicated that nobody really knows how deep its’ problems run!
-----
* ‘
Yesterday’s bad guys come to the rescue’ …of UBS, Morgan Stanley etc
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Globalisation in Minerals: Driving Forces…
From the supplier’s viewpoint:
access to mineral resources access to markets synergies & economies of scale in production partial abandonment of state ownership decline in transport costs [until…]
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…Globalisation in Minerals: Driving Forces…
A new era of resource wars?
Oil and gas trends> Metal ores and metals>Industrial minerals
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...Globalisation in Minerals: Driving Forces…
BRIC affecting all mining [and shipping!] worldwide
China booming, polluting, increasing in costs, rich in industrial minerals . But… ‘from dumping to rationing’ ?
India following
Russia and Brazil major in industrial minerals, energy
Chinese [+Russian] mining giants invest abroad: Latin America / Australia / Africa/ China and now North America
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...Globalisation in Minerals: Driving Forces
London still the center of mining finance , but …
EU directives and regulations : Natura , REACH , Emissions Trading Systems, IPPC Directive/BAT, Waste directive …
Trade institutions respond to many of these challenges w/ info, lobbying, networks: Euromines, Eurometaux, IMA, The World Mining Council
M&A : a key element of globalisation
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M&A in Mining…
*Source: Raw Materials Data, Stockholm
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M&A in Mining…
*Sources: Metals Economics Group, The Economist, D.Humphreys
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M&A in Mining ’99-’01…
*Source: D.Humphreys
Bad market conditions, low prices, low morale
Hence M&A mostly defensive/cost-cutting/consolidation/ rationalisation
Economies of scale
Exploration vs. M&A
Followed similar moves in the oil industry
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… M&A in Mining ’99-’01
Source: D.Humphreys
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M&A in Mining ’05-’06…
Bull market, hence different M&A drivers: Expansion mood: ‘growth and opportunity’, rather than ‘cost-cutting and restoration of profitability’
Companies had excess cash and bought, rather than returned to shareholders
Strong demand from China, India
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…M&A in Mining ’05-’06
Commodity diversification
Resource availability: low exploration, difficult permitting [politically, environmentally]
Economies of scale
Exploration vs. M&A
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…M&A in Mining ’05-’06
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Industrial Minerals are Different
Deposits more dispersed A long-term commitment necessary Complex marketing and market development Wide range of applications Pricing not set by a stock market Sophisticated processing often necessary Shipping : an important aspect 26
M&A in Industrial Minerals
… In next six slides:
M&A in ind mins
Private equity capital in ind mins : examples
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...M&A in Industrial Minerals…
*Source: The Core 1/08
Year over year, ’06-’07
No of transactions in ’07 +57% over ’06 28
…M&A In Industrial Minerals… by mineral ’06-’07
*Source: The Core 1/08
Lime and Clays most active mineral targets 29
TARGET
RTM Borax Keliber Li Slovmag General Chemical US Silica Co.
Keliber Oy
M&A in Industrial Minerals 2008
Source: The Core 1/08, Nicoletopoulos Consulting
TARGET COUNTRY MINERAL
Denver Borate Finland Lithium Carbonate Slovakia US Magnesite Soda Ash US Silica Sand
ACQUIRER
Nordic Mining Magnezit TCL General Chemical Ind. Products Finland Lithium Carbonate Nordic Mining
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M&A in Industrial Minerals 2007
Source: The Core 1/08, Nicoletopoulos Consulting
TARGET TARGET COUNTRY
Searles Valley Minerals Inc.
Van Mannekus Birch Mountain Resources US Germany Canada Oglebay Norton Company Ceture Kimtas Advanced Industrial Mins US Silica Co.
US Turkey Sierra Leone US Hill & Griffith Co.
US
MINERAL
Borate, Soda Ash, Na2S04, Salt MgO Limestone/Aggrega tes Lime , industrial sands Lime Coal
ACQUIRER
Nirma 50% Grecian Magn Tricap Partners Carmeuse Carmeuse Hidalgo Industrial Sands Harbinger Capital Partners Bentomite,Carbon S&B Zemex Industrial Mins Inc.
US, Canada Attapulgite, Mica General Chemical Industrial Products
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M&A in Industrial Minerals 2006
Source: The Core 1/08, Nicoletopoulos Consulting
TARGET
Trisil Minerals Inc. Unifrax Corp Buffalo Fluorspar Zemex SMPI Minelco Royal DSM NV Izocam stake Engelhard Corporation
TARGET COUNTRY
US
MINERAL
Riprap, Crushed Rock, Guard Rock US Ceramic Fiber
ACQUIRER
Global Industrial Services AEA South Africa US UK The Netherlands Istanbul Newark Fluorspar Sallies Talc Vermiculite Wold Talc Hoben Int’l Iodine Mineral /Glass/ Stone Wool, Fibre Glass Kaolin SQM St. Gobain BASF
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Venture Capital / Private Equity in Industrial Minerals M&A
Source: Nicoletopoulos Consulting
The Carlyle Group bought PQ Hg Capital …Omya talc division ‘Mondo Minerals’ GP Investments …Magnesita Resource Capital Fund …QMAG , NYCO Minerals Rhone Capital of the USA …Almatis GmbH , LWB Refractories Palladium Equity Partners …Prince Minerals 3 i sold UCM 33
Company Policy Recommendations…
Whether they like what is going or not , modern industrial minerals companies cannot ignore the realities of globalisation, nor of the developments of the last months: appropriate strategies should be explored
In particular, im companies should …
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..Company Policy Recommendations…
Be always alert re market as well as administrative issues Participate in alliances , initially to test the waters Get involved in distribution channels [and in shipping?] Perform joint R&D projects , eg in EU Framework projects Be prepared for major M&A s and alliances ; their customers [eg refractories] and their customers’ customers [eg steel] are doing it ! But : beware of competition policy, especially ‘market definition’ and ‘producer vs consumer surplus’
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...Company Policy Recommendations...
Be socially and environmentally aware and proactive Communicate , esp. on environmental matters Engage communities [and more…] early in new projects.
A common [unfavourable] perception : ‘mining benefits are national, costs are local’ Be active in international institutions and associations
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...Company Policy Recommendations…
Use financial institutions & consultants as antennae Employ cosmopolitan , multilingual staff Make full use of IT Keep improving management, corporate governance and financial reporting Set a clear strategy and business plan , but be prepared to scrap it if a great new opportunity arises Lastly , be prepared for a market downturn: good times do not last forever !
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…Company Policy Recommendations: A Concluding Comment
Ours is a mature industry, highly competitive and cyclical Assets are depleting, for technical as well as administrative reasons Demand for mineral products may be still good, but projects will be harder to do The risk-reward structure is changing There is polarisation towards: -large diversified companies and -small companies to pioneer new regions and fill niches of the market It is very difficult to do both !
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Thank you !
V.Nicoletopoulos
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