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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.
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.
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.
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.
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.
Tagged with: Alcan, Anglo American, Barrick Gold, BHP Billiton, Boliden's Los Frailes dam failure, BP plc, Chevron Corporation, ConocoPhillips, Hess Corp., Impact, Kinross Gold, market capitalization, Potash Corp., Rio Tinto, Royal Dutch Shell plc (ADR), share values, sour deals