London’s largest mining houses are like mini-portfolios. A share in Rio Tinto (RIO), BHP Billiton (BLT) or Anglo American (AAL) is an investment in an array of commodities, each with their own price dynamics. Sometimes, as was the case in the mining slump in 2014 and 2015, the price of many of those resources can fall in tandem. Normally, they are meant to offer diversification: think Anglo’s diamonds and copper output, BHP’s iron ore and oil production, and Rio’s sales of mineral sands and aluminium. These benefits are not lost on investors, nervous of the inherent volatility of commodity prices. It may also explain why markets appear increasingly keen to back projects that offer exposure to more than one commodity, particularly involving copper-gold deposits. But just because the trend exists, does it mean that multi-commodity projects should attract a premium? And do by-products necessarily point to lower break-even costs?
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