$14.5-Billion vote of confidence

Fourteen-and-a-half billion dollars! That’s a lot of money and I don’t care how rich you are, those figures are attention grabbers in any circle. Even the richest of rich raise their eyebrows when the words “fourteen-and-a-half billion dollars” are mentioned because there’s always some serious business, and usually interesting opportunities, associated with that kind of money.

In mining, particularly when that amount of money is mentioned in conversation, juniors from coast to coast envisage more drill rigs or even a mine on their property someday while active miners probably start thinking deeper and wider about the properties they already own and operate.

And like the prospectors and developers I just mentioned, there are also others associated with mining (and big money) that think investing in the industry is a good thing too. And that’s exactly what Caterpillar Inc did when it recently announced that it bought Bucyrus International, Inc. for $8.8 billion and is planning to spend another $5.7 billion on research and development (and “yellow” paint) to make the products they just bought even better.

What Caterpillar did not only made headlines around the globe, but it also sent a message to the entire world and its leaders that the company believes in mining and that it is committed to the industry for its own future too.

After all, $14.5 billion is a huge investment and when you consider how many other business divisions CAT has (machinery, engines, finance and even on-highway trucks now), convincing its Board of Directors to approve the Bucyrus purchase and “go mining” instead of spending elsewhere, the whole deal shows overwhelming confidence in the mining industry.

There’s no question that CAT will benefit from what it bought from Bucyrus because, after all, Bucyrus has been in the mining business far longer than CAT, and since it started making mining equipment in 1880, it has learned a thing or two about mining.

For instance, Bucyrus equipment was used almost exclusively: it supplied 77 of the 102 “steam shovels” used during the construction of the Panama Canal and even U.S. President Teddy Roosevelt took control of one of the shovels during a (“photo-op”) visit to the site.

That’s just one project where Bucyrus made a name for itself; but it was the quality of machines over the years that sustained its popularity, and that’s why CAT pounced when the opportunity arose to buy the company.

You see, Caterpillar has only been around for about 85 years, and its Mining Division only since 2000, and while there’s no question that its products are sound and reliable, its line of mining products was somewhat limited in some respects and CAT, being CAT, felt that wasn’t good enough for the world’s largest and most-recognized heavy equipment manufacturer.

The acquisition of 20 new mining products (see pages 46-47) now gives the company an arsenal of almost 100 pieces of mining equipment. It’s now a one-stop shop for mining equipment, but more than that, it’s also a universal source of tools that is recognized and accepted by once-distant and almost forbidden parts of the world.

Naturally I’m talking of China, where not too long ago, North American manufacturers wouldn’t have thought twice (or be given the opportunity, for that matter) about setting up shop where language and political policies posed unthinkable barriers.

Today, however, as we all know, that’s changed drastically and mining can take credit for bringing the world closer together, so to speak, because minerals, regardless of where they’re located, are in universal demand, and it takes machinery (be it “yellow” or not) to bring these products to market.

In some ways, however, there’s a sadness to the CAT/Bucyrus deal that I’ve spoken of here, because like every acquisition, be it on the manufacturer level or closer to home involving juniors and entire mining companies, someone gets swallowed up in the “deal.”

Like it or not, identities are lost and feelings sometimes get hurt, but most acquisitions result in a stronger team and better product; and that’s what I think the world will be getting when the Bucyrus “purple” finally fades to CAT “yellow.”