BHP Should Buy Freeport – by David Fickling (Bloomberg News – February 22, 2016)

If there’s any big mining deal that should be happening right now, it’s a takeover of Freeport-McMoRan by BHP Billiton.Most large resources companies pick either solids (mining) or liquids (oil and gas). BHP and Freeport are rare in keeping a foot in both camps. They also share an optimistic view of the long-term outlook for Freeport’s key assets, copper and petroleum.

The fact a deal isn’t happening is one of those odd omissions reminiscent of Sherlock Holmes’s dog that didn’t bark:“Is there any other point to which you would wish to draw my attention?”“To the curious incident of the dog in the night-time.”“The dog did nothing in the night-time.”“That was the curious incident,” remarked Sherlock Holmes.

The attractions of a deal for BHP are obvious. It would easily become the world’s biggest copper miner, leaving current leader Codelco in the dust. The Australian company would end up with control of all three of the world’s biggest copper pits — Escondida, Grasberg and Morenci — and its output of the metal would more than double overnight.

Even so, with 3.5 million metric tons a year of production it would still only account for about 15 percent of the world’s copper supply — a small enough proportion that Chief Executive Officer Andrew Mackenzie could hope to evade the competition concerns that scuppered BHP’s 2010 attempt to merge its iron ore assets with Rio Tinto’s.

The companies’ oil and gas assets are also a neat fit. Both have extensive operations in the Gulf of Mexico’s Green Canyon region and the southern U.S.’s Haynesville shale. BHP is keen to increase its petroleum exposure both on and offshore in the U.S., Tim Cutt, the president of BHP’s petroleum unit, told an investor conference last September. A Freeport takeover would fit the bill nicely.

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