Structure your portfolio for a fierce bidding war among the major miners

Nagle would know. As the boss of a major international mining conglomerate, he sits at the coalface in terms of global copper production.

With an international copper supply deficit looming it seems bizarre… If not downright reckless mining boards would recommend to their shareholders that they accept an offer from a major...

But that’s exactly what the Oz Minerals (ASX: OZL) board did.

A deal that was finally cemented two weeks ago.

An insurmountable Challenge Awaits

Forget about the exponential increases for metal supplies needed to bring about an end to oil…

Maintaining current demand will be a challenge in itself.

The world’s most influential mining executives are acutely aware of this seemingly impossible task.

Yet they have also compounded the problem.

You see, the majors, burned by exuberant acquisitions at the peak of the last mining boom have underinvested in project development and exploration for more than a decade.

Instead of bringing new projects on line, they’ve zipped the purse strings and carried on plunging machinery through marginal low grade rock... Material that would otherwise be considered waste.

As a former geologist in the industry, I’ve seen first-hand, the slow-death effect of companies refusing to spend on project development while feeding marginal ore through processing facilities… Pushing ageing facilities well past their use-by-dates.

As Bloomberg reported earlier this month, the world’s largest copper producing nation, Chile just posted its LOWEST monthly copper output in six years.

The state owned copper conglomerate Codelco expects production to fall a staggering 7% this year.

I’ve been warning my readers for months that Chile was staring down the barrel of a massive cut to its copper output.

This reality is now hitting the headlines.

Lack of investment equals lack of supply.

It’s a trend that will get worse, just as the world demands more copper.

And not just copper, many other critical metals have suffered a similar fate… Years of underinvestment.

It brings me back to the question of acquisitions.

Mines are a depleting asset.

The world’s biggest operators desperately need to resupply their ageing mines.

Lack of project development, inability to make meaningful investment in greenfield or brownfield exploration rules out organic growth.

But for stock holders of mid-cap miners holding quality high grade deposits… This represents a long term opportunity.

Given the state of play, I firmly believe Oz Minerals shareholders will be kicking dirt for years to come… Reeling at their missed opportunity having given up their prized copper assets to BHP.

But Oz should serve as an important lesson to ALL investors.

The majors know what is at stake here.

BHP (ASX: BHP) co-owns the world’s largest copper mine, Escondida in Chile…

Last year the big miner claimed lower ore grades, supply chain disruptions and a reduced workforce due to Covid-19 impacted its FY22 copper production in Chile.

But lower ore grade is the key…. You can’t change the geology of a deposit.

You also can’t find replacement ore in a snap.

Higher prices will mean little for the likes of Glencore, Rio Tinto (ASX: RIO), or BHP if they can’t resupply their ageing mines.

Prepare your portfolio for a fierce bidding war as the majors try to get their hands on the next generation of deposits.

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