Rio Tinto plc (NYSE: RIO) wrote down $14 billion alone earlier this year and fired the CEO in the process. Anglo American plc, which trades in London, wrote down $4 billion on an iron ore mine and CEO Cynthia Carroll will be out of work in April. BHP Billiton Ltd. (NYSE: BHP) wrote down $3.3 billion in August on natural gas and aluminum projects. Brazil’s Vale SA (NYSE: VALE) has taken a $4.2 billion charge in 2012 and that may rise when the company reports results next month.
Over the past 10 years, mining company mergers and acquisitions have totaled more than $1 trillion, according to a report at Bloomberg. Writedowns have so far cost shareholders 5% of the value of those mergers. And there may be more on the way.
BHP is expected to write down $2 to $5 billion on its aluminum projects. And Glencore International Inc. is likely to write off between $5 and $7 billion as a result of its merger with Xstrata plc.
Gold miners haven’t been immune to the writedown epidemic either. Kinross Gold Corp. (NYSE: KGC) and Newmont Mining Corp. (NYSE: NEM) took charges of $2.49 billion and $1.61 billion respectively in 2012. And Barrick Gold Corp. (NYSE: ABX) fired its CEO last summer after cost overruns crippled shareholder returns.
Softening prices, especially for base metals like nickel and aluminum, get a share of the blame. But mining company CEOs and boards think big: big risks, big rewards, and big egos, not necessarily in that order.
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