Tight budgets and nervous investors have convinced major miners that a cheap, timely way to ensure a strong pipeline of quality assets is to team up with junior, more nimble exploration firms.
Miners have slashed costs by delaying projects, sold assets and cut exploration budgets to free up cash to pay down debt, much of it acquired during and after the commodity price supercycle, which started in 2002.
Now, with prices of commodities such as copper and iron ore at multi-year lows, capital expenditure is expected to remain subdued and investors reluctant to sanction large acquisitions or projects.
One option is to buy profitable, low-cost so-called “tier 1” good quality mines, but few are up for sale. A viable alternative is to own mines with small explorers.
“Partnering allows us to complement our strengths in big data, technology and research alliances with what juniors can bring…ideas and projects, boots on the ground and acreage,” Stephen McIntosh, Rio Tinto’s (RIO.L) head of growth and innovation, said. “It will help all of us to accelerate and enhance the discovery of Tier 1 assets.”
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