Cop­per Slowly Joins Elite Pre­cious Met­als’ Club Min­ers are sell­ing ev­ery­thing from iron ore to coal but hold­ing on to cop­per as they ex­pect a short­age by the decade-end

The Economic Times - - Commodities Plus -

Ag­nieszka De Sousa

Lon­don: Cop­per is a pre­cious metal these days. While top min­ers such as An­glo Amer­i­can and Glen­core are sell­ing any­thing from iron ore and coal to agri­cul­tural as­sets to pay down debt amid a rout in com­mod­ity prices, they’re loath to part with the best cop­per re­sources.

That’s be­cause it’s one of the few met­als ex­pected to be in short­age by the end of this decade as cool­ing in­vest­ment means not enough mines are built. Those with cash to burn are tak­ing an in­ter­est, with cop­per a fo­cus for min­ers and fi­nanciers gath­er­ing this week for an an­nual in­dus­try con­fer­ence in Chile, the world’s big­gest pro­ducer.

“Cop­per is the most de­sir­able com­mod­ity,” said Michael Scherb, founder of min­ing in­vestor Ap­pian Cap­i­tal Ad­vi­sory in Lon­don, whose col­leagues are at­tend­ing the meet­ing in San­ti­ago. “We are look­ing very hard at global cop­per projects.”

It’s a sign of the times that Rio Tinto Group, the sec­ond-largest miner, sur­prised many by ap­point­ing the head of cop­per as its next chief ex­ec­u­tive of­fi­cer. BHP Bil­li­ton, the big­gest, is also fo­cus­ing on the com­mod­ity as it seeks in­vest­ments af­ter adding an ex­tra $10 bil­lion into its cof­fers by cutting div­i­dends and cap­i­tal spend­ing.

KEY TO STRAT­EGY

One ob­sta­cle for buy­ers is that even in­debted min­ers want to hold onto what has be­come the crown jewel of in­dus­trial met­als. An­glo Amer­i­can, the first ma­jor Lon­don-based miner cut to a junk rat­ing by credit-as­sess­ment com­pa­nies, in­sists it will hold on to the giant Los Bronces and Col­lahuasi cop­per mines.

“We have no in­ten­tion of sell­ing down,” Hen­nie Faul, An­glo’s CEO of cop­per, said in an in­ter­view in San­ti­ago on Mon­day. “These are tier 1 world class as­sets. Both of those are key for us in our cop­per strat­egy. Both those mines have got fur­ther po­ten­tial in years to come when prices are right and the mar­ket is right to ex­pand.” The value of cop­per M&As in 2015 fell to about $3.1 bil­lion, a five-year low, ac­cord­ing to data com­piled by Bloomberg. There were 27 cop­per deals in the year, ac­cord­ing to Ernst & Young, com­pared with 38 for coal and 117 for gold. The low level of ac­tiv­ity “is likely due to the scarcity of as­sets on the mar­ket,” E&Y wrote in an in­dus­try re­port.

“There is a lot of smoke, a lot of talk in the room, but not a lot of ac­tual deals,” Oskar Lewnowski, founder and chief in­vest­ment of­fi­cer of Orion Mine Finance Group, said in an in­ter­view. — Bloomberg

YOGEESH

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