Consolidation of the global mining industry can be expected to continue, and more than likely at an accelerated pace in the current environment of high metals prices and input costs, Raw Materials Group president Magnus Ericsson commented on Monday.

“We will see increasing corporate concentration, but I really do think, and I am possibly sticking my chin out a bit here, that we need more of that,” he said, in a presentation to the Prospectors and Developers Association of Canada's annual convention, under way this week in Toronto.

The industry needed "stronger companies", which would be able to fund much-needed exploration, invest in research and development and generate profit levels that would cope with growing demands from host countries that earnings are shared with local people.

Over the last couple of years, a number of large producers have been swallowed up, including nickel-miner Inco (by Brazil's Companhia Vale do Rio Doce, or Vale), aluminium-maker Alcan (now a part of Rio Tinto) and Falconbridge, which was absorbed by diversified miner Xstrata.

Looking ahead, the world's largest mining group, BHP Billiton, is currently engaged in a hostile bid attempt for Rio Tinto, and Vale is in talks to acquire Xstrata.

By 2007 standards, a tie-up between Rio Tinto and BHP Billiton, should it go ahead, would give the merged entity about 8,7% of global metals production, Ericsson said.

However, this would likely be a smaller figure in reality, as antitrust regulators would probably require the companies to sell some assets to get approval for the transaction.

According to RMG figures, in 2007 the international mining industry was comprised of about 150 majors, 957 mid- and small-tier companies and more than 3 000 explorers.

However, by value, about 83% of metals were alloted to the majors, while small and medium sized companies only accounted for 17%.

“We see here a slight problem in that the middle ground in the industry is being squeezed out of the equation,” Ericsson commented.

Going forward, he expects to see increasing numbers of companies from emerging markets, and China in particular, among the world's biggest mining firms.

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