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Summary of deal failures and their consequences in the mining industry vs. environmental catastrophes

Summary of deal failures and their consequences in the mining industry vs. environmental catastrophes

Mar 6th, 2014

Summary of deal failures and their consequences in the mining industry vs. environmental catastrophes

In the last couple years the mining world has been shaken by a series of large “sour deals”. Among these “deal failures” consequences we can note the following “corporate casualties”. Here is a Summary of deal failures and their consequences in the mining industry vs. environmental catastrophes:

  • Cynthia Carroll CEO of Anglo American said she would quit in Fall 2012.

  • Not long after Marius Kloppler, the man behind the failed deal to acquire Potash Corp. Of Saskatchewan and the shale gas debacle at BHP Billiton was removed.

  • In January 2013 Rio Tinto’s Tom Albanese, responsible for the Alcan acquisition and subsequent write-offs followed to the ranks of the purged top officers. Finally,

  • The ranks of the purged were further inflated by Tye Burt of Kinross Gold and Aaron Regent of Barrick Gold.

Share value before and after

By looking at share values “before” and “after” the losses it is possible to evaluate the failures’ market capitalization impact. Let’s note that “before and after” may be blurred by other circumstances, so data are approximated to the best of our understanding. 

Summary of deal failures and their consequences in the mining industry vs. environmental catastrophes

Market capitalization impact share values “before” and “after” the losses

Interestingly it appears that markets punish less a corporation for a sour deal than, for example, a tailings dam failure or an environmental disaster which have been known to provoke share price collapses and, at the end, ruin of the “owner” company.

Moreover, Riskope believes that legal action will hit users of blatantly flawed common practice risk assessment methodologies that may be used to prepare ERM plans, evaluate M&A, decide major capital jobs.

As an example of share value consequences we show below a partial “history” of share value disaster in the aftermath of Boliden’s Los Frailes dam failure.

Summary of deal failures and their consequences in the mining industry vs. environmental catastrophes

“History” of share value disaster in the aftermath of Boliden’s Los Frailes dam failure.

Other industries display the same pattern. Below we present  a 5 years graph of BP shares and other companies. In fact, we show that the “punishment” is long lasting.

 

Summary of deal failures and their consequences in the mining industry vs. environmental catastrophes

Shares at 5 years for:
Purple: Hess Corp.
Green: ConocoPhillips
Yellow: Royal Dutch Shell plc (ADR)
Red: Chevron Corporation
Blue: BP plc (ADR)

We can see that all these companies took a `hit`in mid 2010. However, BP was hurt the most and still has not recovered compared to the 4 other players.

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Category: Consequences, Crisis management, Mitigations, Risk management

One response to “Summary of deal failures and their consequences in the mining industry vs. environmental catastrophes”

  1. Business Intelligence, Asset Management and Risk (Assessment) basato sul Decision Making. – Riskope | AICEX says:

    […] of their elements and operating conditions. However, decision makers can take better decisions, justify them, defend their selections and positions only if they clearly understand their systems and can properly understand their 360-degrees risk […]

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