As it happens overnight the CIO of the Blackrock World Minin Trust Andy Hambros was quoted in the AFR overnight (see below) and specifically said it is now the right time for miners to acquire existing operations rather than just concentrate on developing mines. He is saying the costs and time to develop a new mine is now making acquisitions more attractive.
All of my research points to a 'Incentive Price' to stimulate new copper mine development is in the range of US$6.00 to US$7.50
This suggests the copper price needs to rise a lot more before the bottom of the range is reached. In the meantime demand for copper, an important transition metal to a decarbonised world marches ever upward.
Investing in good copper companies may prove a very worthwhile investment over the next 5 years.
Cheers.........D
********************************************************************** Mining titan Evy Hambro says it’s better to buy, rather than build
Peter Ker AFR
Resources reporter
May 10, 2024 – 1.52am
The manager of the world’s biggest mining funds, BlackRock’s Evy Hambro, says it’s now cheaper to buy mines rather than build them, in a tacit approval for a wave of big deals like BHP’s bid for Anglo American.
Speaking in London on Thursday night, Mr Hambro commended the big miners for reforming their capital allocation habits over the past decade, and said acquisitions were a “normal” part of business.
BlackRock’s Evy Hambro says mines are cheaper to buy than build.
The comments were conspicuously supportive for mergers and acquisitions compared to Mr Hambro’s rhetoric at other times over the past 15 years, when he prominently urged big miners to focus on shareholder returns rather than value-destructive deals and projects.
Mr Hambro had $2.3 billion of assets under management in the BlackRock World Mining Trust at March 31, and more than 9 per cent of those funds were invested in BHP, making the Australian company the Trust’s biggest holding.
The Trust had 3 per cent of its money invested in Anglo American, making the South African miner its 10th-biggest holding.
Mr Hambro declined to directly comment on the BHP bid for Anglo at Thursday’s annual meeting of the Trust, saying he preferred not to comment on specific stocks.
But asked by The Australian Financial Review whether he was still urging restraint on acquisitions as he had often done over the past decade, Mr Hambro signalled that he was open to deals being done.
“Right now what we are seeing … is the cost of building new [mine] capacity has risen, we are seeing higher costs of constructing, we are seeing higher risks … around resource nationalism,” he said, in reference to the trend for nations to raise taxes on miners.
“So I think the value of assets trading in the liquid market probably doesn’t reflect the fully risk-adjusted cost of building new capacity, and I am sure that has caught the attention of many management teams.
“We think M&A is just normal business, and there is a point in the cycle when things tend to pick up a bit.”
Anglo American directors announced on April 26 they had rejected BHP’s initial, informal offer, which would have seen each Anglo share exchanged for 0.7097 BHP shares, while Anglo investors would have also kept the company’s platinum and South African iron ore assets.
The offer would have required BHP to issue approximately $40 billion worth of new shares to the Anglo investors.
BHP is expected to return with an improved offer before May 22.
BHP’s bid for Anglo continues a wave of deals at the big end of the mining sector, which has seen Newmont acquire Newcrest and Alcoa move to buy Alumina Limited, while Glencore is trying to acquire the coal assets of Teck Resources.
Mr Hambro pointed to low debt levels across the mining sector and a looming shortage of metals like copper in the decades ahead when explaining his optimism for the sector.
“What we have seen over the past, not quite 10 years is absolutely commendable … capital allocation and the disciplined frameworks that companies have onboarded and implemented as a result of consultation with shareholders,” said Mr Hambro.
“We would be absolutely in support of companies maintaining that disciplined approach to how they allocate capital, and that is an essential part, I think, of maintaining trust with investors and maximising the returns.
“M&A is part of a capital allocation framework. Companies can invest organically back into their own businesses, they can seek to bring new assets into their portfolio by building stuff or by bringing it in through mergers and acquisitions, so that is normal business.”
Mr Hambro also manages other mining funds at BlackRock, including a gold fund with more than $6 billion of assets under management.
Aside from the large shareholding that BlackRock World Mining Trust has traditionally held in BHP, there has also been a significant amount of personnel movement between the two organisations.
Mr Hambro’s co-manager of the trust, Olivia Markham, began her career in BHP’s mergers and acquisitions team.
Mr Hambro’s former co-manager of the trust, Catherine Raw, started as BHP’s new chief development officer last week.
Former BHP chief executive Charles “Chip” Goodyear was appointed as chairman of the BlackRock World Mining Trust at Thursday’s annual meeting.
Mr Goodyear will replace outgoing Trust chairman David Cheyne, who previously worked as a lawyer with Linklaters and advised on the 2001 merger of BHP and Billiton.
Mr Cheyne was appointed chairman of the BlackRock World Mining Trust in 2019 because the previous chairman of the Trust, Ian Cockerill, had decided to join the BHP board of directors.
Mr Cockerill stepped down from the BHP board on April 4 because of the extra duties he has recently taken on as chief executive of troubled African gold producer Endeavour Mining.
AIS Price at posting:
24.5¢ Sentiment: Buy Disclosure: Held
(20min delay)