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.
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According to a report in the Wall Street Journal, Caterpillar has reached an agreement to buy Chinese coal equipment company, ERA Mining Machinery, for $887 million, giving it greater exposure to the potential opportunities in the modernisation of China’s coal mines. Caterpillar’s offer represents a 33% premium to ERA’s stock price in Hong Kong before trading was halted in expectation of a takeover announcement. ERA primarily makes hydraulic roof supports for underground mines and is the third-largest maker of roof supports in China based on sales. For the six months ended June 30 2011, ERA recorded sales of $101.3 million, up 86% from the previous year. The supports are made by ERA subsidiary Zhengzhou Siwei Mechanical and Electrical Equipment Manufacturing. (more…)
