You have to admire the cheer leading of the sell side regarding to the big two miners. Fresh from a few days of notes declaring that BHP’s iron ore division is being undervalued, and some more celebration today that BHP’s shale plays may be in the black soon, this afternoon we discover that the two have a secret stash of copper:
BHP Billiton and Rio Tinto could earn as much $US800 million between them for at least three years when they unlock a “secret” 200,000 tonnes of copper at their Escondida copper mine in Chile, Deutsche Bank says.
Deutsche mining analyst Paul Young says Rio and BHP are likely to tell the market in the next six months they have scrapped their plan to tear down one of the two operating plants at Escondida, called Los Colorados.
The mining giants had planned to dismantle the plant when a third big plant, the $US3.8 billion concentrator OGP1, was brought online at the mine in the March quarter next year.
Splendid. Now for some numbers. When iron ore trades at $70 for a year in the near future, Rio’s underlying profit will fall roughly $4 billion (minus $1.21 billion for every $10 fall, all thing equal, according to Rio) with a bit of offset in volume growth.
It’s not so bad for BHP which, as I have said many times, is the pick of the sector, but it’s bad enough.
The copper is pennies in front of a steamroller.
