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
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