Nothing drives change like necessity.

The $1.4 trillion collapse in the value of mining stocks since 2011 is poised to reshape the industry as all but the strongest companies are squeezed by the lowest commodity prices in six years. Rio Tinto Group and BHP Billiton Ltd. are among the best placed to grab assets sold by rivals desperate to stem losses or pay down debt.

The rout in commodity prices, combined with a debt binge in the past decade by mine operators high on surging Chinese appetite for raw materials, means even past titans of the industry are trading at minnow valuations. The Bloomberg World Mining Index plunged to its lowest since 2004 on Monday as Chinese demand falters. Anglo American Plc, worth almost 50 billion pounds ($73 billion) in 2008, is now valued at 3 billion pounds.

“There are going to be fantastic assets available at distressed prices in the market over the next three to six months,” said Simon Grenfell, co-head of global market commodities at Natixis SA in London.

Different Industry

BHP and Rio Tinto could raise as much as $21 billion through share sales to strengthen their finances in preparation for snapping up bargains, Bank of America Corp. analysts led by Jason Fairclough said last week. That would suck up a large chunk of the financing available for equities from investors, according to the analysts.

David Fuller's view

Mining remains the most cyclical of industries.  Nevertheless, it takes superb management and no doubt some luck to avoid seriously underestimating the setbacks. 

BHP Billiton and Rio Tinto are the two big long-term mining holdings in my personal portfolio.  I have held them through downturns, which I have usually used to increase my holdings.  They have speculative appeal at today’s valuations.  The declines are becoming climactic as investors discount sharply lower earnings, possible dividend cuts and/or rights issues before they next experience significant recoveries.  BHP is very close to reducing its dividend.  Rio is in somewhat better financial condition, not least because it does not have crude oil.