Mining CEOs May Favor Takeovers of $10 Billion, Standard Chartered Says

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Mining chief executives “gun shy” from the global financial crisis may favor small-to-medium takeovers to expand production rather than building their own mines that take years to develop, said Standard Chartered Plc.

“The only option they have in M&A is to do the $5 billion to $10 billion deals, maybe even less,” Jeremy Gray, Standard Chartered’s global head of equity research for resources, said in an interview from Hong Kong. “That’s the beauty of M&A, you’re locking in cash flow and you don’t have to deal with long-dated projects.” The collapse of BHP Billiton Ltd.’s $66 billion bid for Rio Tinto Group and Vale SA’s $90 billion offer for Xstrata Plc has discouraged mining companies from mounting similar-sized deals, Gray said. Rio is focused on growth by expansion and acquisitions of a “small-to-moderate” size, UBS AG said this week, citing Chief Executive Officer Tom Albanese.