BHP Billiton, the world's largest mining company, is under fire from shareholders for refusing to rule out another mega-merger in the wake of its failed ?24bn bid for Potash Corporation of Canada.
One investor told the Observer that BHP was "deluded" if it thought shareholders would support another big deal after the failure of three major transactions in as many years. Two out of three have run into the ground due to opposition from regulators.
Shareholders are up in arms over remarks made last week by BHP chairman Jac Nasser, who told the company's annual meeting in Perth that "for me, the juice is worth the squeeze on every one of those", referring to a series of large deals that never came to fruition. Nasser, a former chief executive of Ford Motor Company added: "Don't look to us to be chasing smaller acquisitions of lower quality."
The mining majors are generating between $10bn （?6.2bn） and $20bn of excess cash a year, according to analysts, thanks to soaring commodity prices.
But shareholders want the money to be invested in existing mining projects and distributed via higher dividends rather than see "large-scale acquisitions that face intense public scrutiny".
BHP has spent hundreds of millions on aborted transactions, paying fees to advisers at investment banks "who must be rubbing their hands with glee," said one investor.
"Although past deals have made the mining majors the success stories they are today, not all transactions work," says Charles Kernot, mining analyst at Evolution Securities.
Kernot said Rio Tinto's acquisition of aluminium producer Alcan at the height of the credit boom had "almost bankrupted the company… and even now, Rio isn't making much of a return on its Alcan investment".
Rio's chief executive Tom Albanese will seek to appease his critics this week when he announces plans for a big increase in capital expenditure in Australia and higher dividend payouts from 2011.
He will rule out plans for a major purchase, although "bolt-on acquisitions" are on the cards, which he defines as deals worth less than $10bn.
Expanding via acquisition has always been an appealing prospect for miners as it is often cheaper to acquire competitors than develop new mines from scratch.
BHP has been one of the fast-growing companies following its merger with Billiton in 2001, but under chief executive Marius Kloppers the company's expansion plans have stalled.
It was forced to pull a hostile bid for Rio in the wake of the global financial crisis; then last month, BHP and Rio withdrew a joint venture proposal to create the world's biggest iron ore exporter in Western Australia – following pressure from regulators.
The final blow came a week ago when the Canadian government blocked BHP's bid for Potash, saying it was not in the national interest, sparking concern about the rise of protectionism.
BHP's corporate failures have cost the company ?545m in fees, a sum that is greater than the market value of most medium-sized public companies.
BHP last week agreed to buy back the remaining $4.2bn worth of shares from a $13bn programme that it suspended during its bid for Rio in 2007.
But investors want a significantly higher dividend to soak up cash, arguing that payouts are a better way to underpin stock prices than buybacks.
Kernot says leading mining companies could become more like pharmaceutical groups, which have begun paying much higher dividends following the decline of large-scale merger activity. The dividend yield on GlaxoSmithKline's shares is more than 5%, against 1% in 2000.
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