![\"Iron](\"http:\/\/www.investmentu.com\/wp-content\/uploads\/2012\/02\/iron-ore-industry-ma.jpg\" "\\"M&A")
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Last Thursday, Swiss miner\u00a0Xstrata<\/strong>\u00a0(LSE: XTA<\/a>) and commodities trader\u00a0Glencore<\/strong>\u00a0(LSE: GLEN<\/a>) announced a potential blockbuster merger that would shake up a few of mining’s biggest industries.<\/p>\n According to\u00a0Reuters<\/em>, the deal is set to total $80 billion. And the newly combined firms “would rank as the world’s largest thermal coal exporter, the largest zinc producer and third-largest copper miner\u2026”<\/p>\n Many analysts are already predicting a jump in the price of coal, copper and zinc in the coming weeks.<\/p>\n But the all-share merger would also disrupt another big mining industry\u2026 iron ore. And investors will want to pay close attention.<\/p>\n Over the past 10 years, iron ore has had a run even gold can’t touch<\/a>.<\/p>\n From August 2001 to August 2011, prices jumped 1,266%. Gold jumped 566% comparably.<\/p>\n Today, about 70% of iron ore traded in the world is accounted for by three companies \u2013\u00a0BHP Billiton<\/strong>\u00a0(NYSE: BHP<\/a>),\u00a0Vale<\/strong>\u00a0(NYSE: VALE<\/a>) and\u00a0Rio Tinto<\/strong>\u00a0(NYSE: RIO<\/a>). And they’re raking in massive profits.<\/p>\n Reuters\u00a0<\/em>reports, “Iron ore sells for around $140 per tonne to China\u2026 and only costs about $20 to $30 per tonne to mine.” China’s steelmakers aren’t very happy about paying such high prices. But since October 2011, they’ve had a little bit of a reprieve.<\/p>\n The “big three” have flooded the market with iron ore supplies, driving the price lower, to around $120.<\/p>\n As mining.com explains, the iron ore’s big players are “concentrating on building market share rather than maximizing prices. This way the giants drive high-cost producers out of the business.”<\/p>\n If Glencore and Xstrata don’t want to get left out in the rain, they should make this merger happen.<\/p>\n And there are two main reasons it’s more likely to happen than not.<\/p>\n First, Glencore already owns 34% of Xstrata. So both companies already understand the risks and advantages this merger carries. And it should make it that much easier for them to agree on a final price.<\/p>\n Second, Xstrata has been trying to gain a stake in the iron ore industry<\/a> for years. In 2009, the company attempted to purchase\u00a0Anglo American<\/strong>\u00a0(LSE: AAL<\/a>). The deal would have made Xstrata the fifth-most-profitable company in the iron ore market. But talks fizzled and the deal fell through.<\/p>\n Now the proposed merger between Glencore and Xstrata has reignited speculation of another takeover attempt<\/a> coming for Anglo American, the world’s fourth-largest iron ore producer.<\/p>\n A few other companies also stand to be bought up if a deal is reached, as well.<\/p>\n First Quantum Minerals<\/strong>\u00a0(LSE: FQM<\/a>),\u00a0Fortescue Metals Group<\/strong>\u00a0(PINK: FSUMF<\/a>) and\u00a0Freeport McMoRan Copper & Gold<\/strong>\u00a0(NYSE: FCX<\/a>) are also being seen as potential targets.<\/p>\n But Freeport may also be too expensive for Xstrata and Glencore and could end up as more of a competitor than potential takeover.<\/p>\n Only time will tell. But this is one development that should begin unfolding in just the next few weeks.<\/p>\n Good investing,<\/p>\n Mike Kapsch<\/p>\nIron Ore Equals Big Profits<\/strong><\/h2>\n
Glencore and Xstrata Make Sense<\/strong><\/h2>\n
Iron Ore M&A Heating Up<\/strong><\/h2>\n
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