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BHP can afford to think bigger, though. Right now, major mining M&A is in the air. Glencore and Rio Tinto have held talks about a deal that would likely be the largest in industry history. That suggests the moment is ripe for a combination BHP has long contemplated, but always shied away from: A bid for Freeport-McMoRan, the biggest copper miner of all.
Such a tie-up would double BHP’s production of the red metal overnight and give it four of the five biggest copper mines, but still leave it with less than 20 per cent of global mined supply, well below levels that should trigger competition concerns.
Chief Executive Officer Mike Henry says he’s entirely focused on growing BHP’s existing mines following the failure of the Anglo American bid, and presented a chart at half-year results last week showing why organic growth promises better returns than takeovers. But if you replicate BHP’s own numbers, it’s clear that it downplays how financially attractive Freeport’s far bigger deposits are.
The downside of any such deal has always been the whiff of sketchy governance that hangs around Grasberg, Freeport’s biggest mine. Located high in the remote mountains of Indonesia’s half of New Guinea, it’s situated in a region that has long been synonymous with clashes between separatist groups and Jakarta’s security forces, many of the latter funded by Grasberg’s owners as site protection.
On top of that, mining waste is dumped into rivers flowing down toward the sea — not a good look for BHP, which has been plagued over the years by mismanaged mine tailings at its former Ok Tedi copper-gold mine over the border in Papua New Guinea, and the Samarco iron ore project in Brazil.
[BHP chief executive Mike] Henry would do well to strike while the copper is hot.
Those issues are enough to give a cautious miner pause. But the political risks around Grasberg have diminished of late. Years of tense negotiations between Freeport and Jakarta concluded in 2018, giving a state-owned company a majority stake and reducing the risk of expropriation. It’s been nearly five years since separatist violence claimed a life within Grasberg’s immense operational area, a region roughly the size of Rhode Island.
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Freeport has also worked to turn around its poor reputation. These days, it scores highly (better than BHP, in fact) in a ranking of resource companies’ human rights performance by the World Benchmarking Alliance, a corporate responsibility non-profit. In 2023, Freeport and Grasberg were awarded the Copper Mark, an industry label intended to promote responsibly-sourced metal that gave the tick of approval to Grasberg’s disposal methods.
The world’s greatest mineral deposits can be exploited for decades or even centuries, but the opportunity to buy them only comes up once in a generation.
For BHP, that moment may finally have arrived. Henry would do well to strike while the copper is hot.
David Fickling is a Bloomberg Opinion columnist covering climate change and energy. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.
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