Forget iron ore for now, the world’s largest mining company is making a bold bet on copper.
Global mining giant BHP Billiton (ASX:BHP) has decided to move away from iron ore and direct upcoming investment to new copper projects, in an effort to meet demand from China, its main customer.
“As we go forward, we’re likely to invest a lot more in copper than we are in iron ore,” chief executive officer Andrew Mackenzie was quoted as saying by Bloomberg. The miner plans to boost copper sales to China more than iron ore and will invest in mines in Chile, Peru, South Australia and North America, adds the report.
The company is, in fact, very close to getting final approval for its Resolution project, jointly owned with rival Rio Tinto (LON:RIO), which is set to become North America’s largest copper mine.
BHP is also looking at moving forward with the expansion of its Olympic Dam in Australia, one of the biggest copper deposits in the world. According to chief financial officer Peter Beaven that plan, coupled with $4 billion in new equipment under construction at the company’s Escondida mine in Chile, could yield hundreds of thousands of additional tonnes of the red metal per year.
Positive outlook
The industrial metal is one of the few commodities forecast by analyst to out-perform most other metals in coming years. Some even predict a “significant deficit” of the red metal beyond 2018.
Central to BHP’s fresh strategy seems to be the conviction that Asia’s, and particularly China’s, middle class will begin spending more on consumer goods such as air conditioners and refrigerators, which require a lot of copper.
Based on data from the World Bank, current household spending accounts for only around 35% of the Chinese economy versus almost 70% in the U.S. On the other hand, China’s construction boom, which boosted demand for iron ore and steel-making coal is losing steam as Beijing cracks down on real-estate speculation.
According to a company presentation last month, BHP has invested $13.3 billion, or 17% of the company’s total spending, in copper operations over the last five years.
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4 Comments
Mike Failla
Bhp had a world class copper mine in san manuel, arizona and look how they treated that. Productive cost effective and world class smelter and infrastructure. Miners out of work ,destroyed the mine and reclaimed land and moved on. Huge amount of ore left and all infrastructure buried and a more than willing highly skilled block cave miners all out of work. Who knows? Maybe a lesson was learned, I certainly hope so but still it all went away. Victims of corporate angst!
LAMB
‘OUT OF THE FRYING PAN & INTO THE FIRE’ – Really, CEO’s of the large companies are desperate to appear to shareholders that they have control of a bad economy – jumping from one commodity to another is NO SOLUTION.
The WINNERS are those that stick it out and come out on top at the end – we have been through similar economic down-turns and survived. Those that do not survive should not have been in the business to begin with.
brettles
they never learn these people , that’s why the cycle never changes over the years.
brettles
mike , these people don’t care , all they worry about is meeting their agreed salary targets ,I’ll bet that san manual copper mine ended up with a bad manager who allowed his HR people to run the mine down . Why , well when they have economies of scale , they can always mine it cheaper elsewhere & run the rest off in tax write-offs. Easy when you can move across borders.