Ann: Copper Extended Along Strike and Bonanza 994g/t Silver at T3-MOD.AX, page-83

Rio on the hunt for Tier 1 copper assets

The decision of Rio Tinto to appoint the youthful and aggressive Jean-Sébastien Jacques as chief executive comes as the mining world is set to change.
Three of the great mining houses of the past — Anglo American, Freeport and Glencore — have a string of mining assets that are for sale. With resource prices now rising, they have a better chance of raising much needed cash.
However, the only two major mining houses capable of making a significant purchase are Rio Tinto and BHP. While naturally they are casting an eye over what is on the market, so far, neither company has been interested in those properties listed as “for sale” because the assets are what BHP and Rio regard as second-tier. (The sellers would disagree).
Many in the industry, including BHP, believe that the worst of the commodity slump is over so the assets that are for sale may attract buyers. But it’s the assets that are not on the market that tantalise the majors.

Freeport has some of the best copper assets in the world and Anglo has world-class platinum holdings. These assets will only hit the market place if either the global situation becomes a lot worse or they can’t sell their second-tier assets.
People in BHP and Rio Tinto are aware that their current tier-one mining assets reflect decisions made decades ago when there was a mining slump. Two visionary chief executives created much of the present asset situation of BHP, the late Ian McLennan in the 1960s and the late James McNeill in the 1980s. Not to forget the work of Brian Loton in stopping the company being smashed later in the 1980s.
In the case of Rio Tinto, it was the late Maurice Mawby who dealt with Lang Hancock to establish the great iron ore deposits that now dominate the company.
McLennan, McNeill and Mawby all acquired tier-one assets when no one else wanted them. And that’s the challenge of the current managers — do they follow their past heroes or do they keep on with current policies.
The BHP balance sheet is still weakened by the shale oil purchases, high-cost share buy backs and other boom moves, while Rio still bears the scars of the Alcan acquisition.
However, the current chief executives, Sam Walsh at Rio Tinto and Andrew Mackenzie at BHP, have transformed the companies by stripping out much of the bloated mining costs, so both have an eye for top assets, particularly ore reserves. And once Jean-Sébastien Jacques is in the Rio saddle, he will re-examine past strategies.
BHP’s view of the world is that oil, copper and later potash will be strong performers in the years ahead, though they’re not willing to put a time frame on it. Iron ore will more restrained but a great cash generator.
BHP has undeveloped oil and copper and believes that Olympic Dam will be a strong performer in coming years because there are signs that the copper/uranium leaching process that BHP has been developing is going to work. So, BHP believes it has growth prospects but if it were possible to acquire a prized tier-one copper or oil resource it would be tempted.
We will learn more about Rio Tinto’s view when the new chief executive takes charge on July 1, but I suspect it will be similar to BHP.
Jean-Sébastien Jacques is a clear fan of copper. Most institutions rate Rio Tinto’s balance sheet as better than BHP but the rating agencies have a reverse view, given that a significant portion of BHP debt is in the form of long-term hybrid securities, which have many of the features of equity.
If either wants to raise substantial capital (and I emphasise there is no plan to do so), they have to either have a rights issue to shareholders and/or issue hybrid securities. BHP’s US dollar hybrids currently yield more than 7 per cent. It’s a waiting game.

http://www.theaustralian.com.au/bus...o/news-story/30cc5bb4cf214e74c38d847113f79585