Will BHP and Rio buy up distressed assets?

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Analysts at Bank of America have speculated that BHP and Rio Tinto may be gearing up to acquire assets from weakened rivals.

AFR reported the rumours, suggesting the two heavyweights could sell as much as $30 billion worth of shares to finance new acquisitions in 2016, with BHP expected to make up 75 per cent of the offerings.

BHP’s London market value dropped seven per cent on Wednesday, the most significant drop in two months, while Rio Tinto fell 6.2 per cent to a six-year low.

Year on year Rio Tinto has lost 41 per cent of market capitalisation, while BHP has faltered 50 per cent.

The iron ore majors have not fared as poorly as coal giants Anglo American (down 79 per cent year on year) and Glencore (down 70 per cent).

Vale has also lost 69 per cent of market value over the past year.

Part of the huge loss suffered by Anglo American was directly attributable to the company’s platinum business, which will be hit hard by their plans for sweeping cost reduction reforms, announced on December 8 last year.

Anglo announced they would carry out asset sales and job reductions, with around 85,000 staff to go worldwide.