Big Miners at Odds Over Whether Worst Has Passe – by Rhiannon Hoyle (Wall Street Journal – October 31, 2016)

Rio Tinto is ready to dig again while BHP and others hold back major investments

SYDNEY—Global mining companies face an urgent dilemma in the grip of a prolonged commodities downturn: whether to bet heavily on new projects absent firm signs of an upturn—or wait until a recovery in prices gathers pace.

At the heart of each company’s decision is whether China is finished as an engine of torrid resources demand, or about to ramp up spending, this time on consumer goods such as air conditioners and refrigerators. If the latter, it will require commodities not at the forefront of China’s industrialization so far.

For mining executives, it means navigating a commodity cycle that experts say is different from any in the past 100 years. Mining typically follows an about four-year boom-to-bust cycle, although some industrial-led supercycles can last decades. It is unclear whether the industry is now on the cusp of a renewed boom or still unwinding from the last one.

Rio Tinto PLC is among the few mining companies betting big. In May, the Anglo-Australian miner agreed to a $5.3 billion expansion of a Mongolian copper mine that will ease its earnings reliance on iron ore. It also is moving forward on a $1.9 billion bauxite project in eastern Australia for aluminum and on an iron-ore mine in the country’s remote western Pilbara region.

“The growth strategy of Rio going forward will be: Build and buy smart,” said Jean-Sébastien Jacques, who became Rio Tinto’s chief executive in July. Rio Tinto thinks copper, rather than iron ore, will be among the first commodities to recover.

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