OBSERVATION: Expected Recovery in Copper reflected by Finances

To get a concept of where mining executives are allocating their capital, we've combed through the past five years of reports from the eight major diversified miners that have a real choice of where they invest their cash — BHP Group, Rio Tinto Group, Vale S.A, Anglo American Plc, Glencore Plc, South32 Ltd., Vedanta Resources Plc and Teck Resources Ltd.

Althou gh m iners' overall capital spending has shru nk, base m etals copp er, zinc and

alum inum form a larger share of the bu dgets. However, the enforced diet doesn't app ly equally to all comm odities. C opp er is cu rrently eating up an ou tsize share of bu dgets right now, with ju st shy of $8 billion invested by our group of companies over the 12 months through June.

The tendency underlying all this is the manner capital spending dropped following the boom in the early part of the decade and is yet to show strong signs of recovery. Mining executives continue to be ridding the sackclothand-ashes of "disciplined capital allocation," which they took up to atone to the vast amounts of wasted money throughout the market's last peak.

Ask mining companies that which of the mineral resources will see good long-term demand and they will naturally answer, "Everything." However, a closer look at spending can give the lie to this outlook - and emphasize the times when they're putting their money where their mouths are. Right now, “This Base” indicates that the recent gloomy prognosis for copper might not survive. Over a third of capital spending by large diversified miners is being dedicated to the metal at the moment, up from levels of 20 percent or less early in the decade. That represents a substantial wager that forecast shortages for copper over the next decade will materialize. Zinc, aluminum, and platinum-group metals are currently running red-hot, also — but fertilizers, petroleum and iron ore seem to be fatally out of vogue.

The flip in zinc and aluminum is much more conspicuous. These two elements are running more or less the exact same degree in dollar terms, despite the fact that capex as a whole is about a third of what it had been in 2013, whereas spending on copper is still well down from five years ago. Platinum-group alloys are in a similar scenario, suggesting that the recent

record high for palladium is much more than just a one-off. For all Glencore's predictions about a rosy future for fossil fuels, its expansion capital spending in coal and petroleum has all but dried up.

Looking at capital spending is not a pure measure of miners' tastes. The leading spender of the industry, BHP, has an overstated effect on the general picture. The ebbing of its own vast expenditures on oil under pressure from shareholders such as Elliott Management Corp. accounts for the majority of the fall in that class, despite ongoing outlays by Teck and Vedanta. Its escape from the potash fertilizer business, along with Vale movement from crop nutrients accounts for the majority of the spending decrease in that area. Also, the slowing of iron ore spending from a $21.3 billion yearly run-rate to $5.3 billion between December 2013 and June 2018 is almost entirely tied down to BHP, Vale and Rio Tinto, with a little assistance from Anglo American.

Investment Capital plans remains a useful corrective at those times when miners are attempting to sell you a story they do not really buy themselves. Despite optimistic clamours made by several miners about nickel during its run up to more than $15,000 a metric ton in June, no one is really spend

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Together we’re engineering what’s possible and moving the world forward. ing money to grow more of it — with the exception of Glencore, whose Koniambo deposit has the virtue of being unusually high-quality, therefore able to survive periods of weak pricing.

Likewise, thermal coal is yet to truly pick itself up from the spending amounts plumbed in 2015 and 2016, despite prices that touched a five-year high this year. A segment that accounts for 30% of Ebitda and over fifty percent of revenue, Glencore only managed to get about ten percent of the organization's growth capex in 2017. That sounds like a business being run for only money, rather than one with a growing future.

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