BHP Billiton (ASX:BHP), the world’s largest mining company, is said to be among the favourites to win the race for Barrick Gold’s (TSX, NYSE:ABX) Zaldivar copper mine in Northern Chile, according to sources quoted Monday by The Australian.
The acquisition by company, who faces competing bids for the mine from Canada’s Teck Resources (TSX:TCK.A, TCK.B), (NYSE: TCK) and Hudbay Minerals (TSX:HBM) among others, makes a strong business case.
BHP, together with partner Rio Tinto (LON:RIO) already owns the world’s largest copper mine, Escondida, which sits, quite literally, across the road from Zaldivar. Real cost synergies are not common in mining and they are mostly the product of proximity, which is exactly what Barrick’s mine has going for it.
Copper, in turn, has been repeatedly named by BHP as a commodity of choice or “pillar”. What’s more, CEO Andrew Mackenzie has openly stated he would consider opportunistic bolt-on acquisitions, rather than its more traditional transitional deals, in both copper and its other key division — petroleum.
And while Barrick is looking to sell only 50% of the mine, The Australian sources claim BHP is looking to buy the entire asset, as part of ongoing attempts to buy copper and oil assets globally.
Zaldivar, an open-pit, heap-leach mine, produced 222 million pounds of copper in 2014, according to Barrick’s website. Proven and probable copper reserves from the mine as at Dec. 31, 2014, were 5.558 billion pounds. Production costs last year were US$1.65 a pound and they are increasing as head grades fall.