Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
China plans to dramatically consolidate the number of mines in its country, according to Caterpillar (NYSE:CAT) and a study by MCCM. And China also wants its mines to be a lot more productive.
Caterpillar released the results of a study in August. In 2004 China had 25,000 operating mines. By the end of 2013 China wants to get that number down to 4,000 mines.
A minimum production of 300,000 tonnes per annum will be required for mine approval.
The Chinese government believes that consolidation will make mines easier to regulate, less prone to accidents and more productive. China’s mines have a notoriously high death rate and account for 80% of total deaths in coal mine accidents worldwide.
Caterpillar believes that China’s push to consolidate and modernize presents the company with an opportunity to sell China modern mining equipment, namely a line of underground mining equipment the company acquired from Bucyrus.
“China has half the reserves in the world, and 90% of that coal is underground,” says Christopher Curfman, Vice President of Mining Sales & Support Division.
“If you want to be in coal, you have to be in underground coal. ”
Caterpillar also plans for $5 billion in investment to grow its current product line and make products for markets in developing countries.
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