The BarkerLetter

Greetings investors!

One of the world’s largest mining companies, Rio Tinto plc, has just agreed to fork over A$43 billion to acquire Canadian aluminium producer Alcan Inc.

It wasn’t long ago that you couldn’t give Alcan away. Back in the days of low metals prices (i.e. the 1990s), aluminum prices were so low that producers had to have ridiculously huge economies of scale just to keep their heads above water.

What a difference a decade makes!

Why would Rio Tinto wait till now to pay an unprecedented price for an aluminim producer? Well, probably they’re as surprised as anybody with the current regime of high materials prices. In addition to big, they also need to be as diversified as possible. When we get to the opposite end of the business cycle (high inventories, low demand, decimated pricing), only the biggest of the big will survive intact.

Something is up with steel too. I’ve read that the three largest iron ore producers - Rio Tinto, BHP Billiton Ltd, and Swiss giant CVRD - will start annual iron ore price negotiations with steel mills next month.

I’m not sure how that’s going to play out. But for the investor, I think it make sense to find a deveoping iron play that hasn’t been acquired yet by any of the big three.

That’s why I like Northland Resources Ltd (NAU. TSX-V. Recent cls: $4.10 Cdn per share), with an impressive iron and base metals porfolio in Scandanavia.

Check them out here on Infomine

Kb