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  3. Three Middling Mining Firms Bet on Scale and Scarcity In May prices for copper, nickel and other metals rose to record level

Three Middling Mining Firms Bet on Scale and Scarcity In May prices for copper, nickel and other metals rose to record level

admin2012-01-22  18
问题              Three Middling Mining Firms Bet on Scale and Scarcity
    In May prices for copper, nickel and other metals rose to record levels, although they have since fallen a bit. Now three mining firms are proposing the most expensive merger in the industry’s history.  The $40 billion deal, in which an American company, Phelps Dodge, plans to take over two Canadian ones, Inco and Falconbridge, would create the world’s biggest producer of nickel, the number two in copper, and the fifth-ranked mining firm overall. The records may not stop there: two other mining firms, Xstrata and Teck Cominco, had previously bid for Falconbridge and Inco respectively, and could make further offers.
    Soaring commodities prices have left mining firms flush with cash and keen to expand. One way would be to search for more metal in the ground, instead of on the stockmarket. But organic growth is expensive at the moment: as firms rush to increase their output to take advantage of high prices, every conceivable input, from engineers to mining trucks’ huge tyres,Those shares is in desperately short supply. Developing new mines is also slow. Mining executives worry, that projects that get the go-ahead when prices are high will not look so attractive when the next recession comes.
    That could be true of the proposed merger too. Phelps Dodge offered a premium of 23% over the price of Inco’s shares and 12% over Falconbridge’s. Those shares, in turn, have been rising for several years along with the firms’ wares—nickel, for the most part, at Inco, and nickel and copper at Falconbridge.
    The bosses of the firms insist that the mark-up is justified, for several reasons. For one thing, they reckon they can squeeze savings of $900m a year out of the combined entity by 2008, by sharing equipment and personnel among adjacent mines. for example, and pooling their marketing staff. More importantly, they argue that the size and diversity of the new comparty will make it less vulnerable to mining’s painful cycles, and so more artractive to investors.
    The biggest and most diversified mining companies, such as BHP Billiton and Rio Tinto, do boast higher share valuations. They produce everything from aluminium to zircon. and so are less susceptible to fluctuations in the price of any particular metal. By the same logic, the more mines a firm is running or developing, and the more countries it operates in. the less risk each individual project poses to profits. The merged trio will certainly have a broader geographical spread, with mines in five continents. But its main projects, in stable places like the United States. Canada and Chile, never seemed that risky in the first place. Furthermore, despite having sidelines in cobalt and molybdenum, the new firm’s fortunes will depend chiefly on the price of copper and nickel—two of most volatile metals in recent years.
    Some analysts mutter that Phelps Dodge embarked on the merger chiefly to save itself from being taken over. Investors seem to share their doubts: Phelps Dodge’s shares fell by 8% after it announced the deal, despite a simultaneous pledge to spend $5 billion on a share buy-back scheme once the merger is concluded.
    On the other hand, the price of nickel and copper jumped on the news. Traders seem to have assumed that the companies would have contemplated such an expensive deal only if they thought that metals would remain in short supply for some time. The more money that mining firms spend buying one another, rather than exploring and developing new mines, the likelier that is.
According to the author, why will some companies boast higher share valuations?
选项 A、They take less risk on prices in the market.
B、They will easily get the mine source all over the world.
C、Their firms would be operated smoothly.
D、They produce copper and nickel.
答案A
解析 题目意为：“在作者看来，一些公司为何以拥有较高价格的股票而自豪?”文中的信息关键句为第五段中的“By the same logic, the more mines a firm is running or developing, and the more countries it operates in, the less risk each individual project poses to profits.”即：同样道理，一家公司经营开发的矿井越多，经营业务所在国家越多，每个独立项目盈利所引起的风险就越小。其中，the less risk each individual project poses to profits是关键信息点。
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