Build v Buy Debate in Mining
By Tshepo Magagane
The most value-adding approach is to find and build – FQM started out by producing 2,000t pa and now, just in Zambia, they are about to hit 500,000t pa!
Khoemacau was taken over for USD35m in distress (went into it during commissioning) and was sold for USD2.0Bn!
The thing about buying a producing asset is that your price is around NAV and then you pay a control premium on top – do a simple, quick contribution/effects analysis, you can immediately tell that you have set money on fire because the cashflows you combine to create NewCo are less than you paid!
You have to build man, you have to build – the impairments that come with buying – phew – through my entire career – which has spanned a very long cycle!
| Frenzy to Buy Copper Mines Hides Supply Problem For Green Energy Transition – Bloomberg.com The prospect of rising demand for the energy-transition metal has prompted hefty takeover bids, including BHP’s tilt for Anglo American — but the hunt for new deposits is still falling short.www.bloomberg.com |
