By Alexandra Wexler in Cape Town, Scott Patterson in London and Rhiannon Hoyle in Sydney 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 20, 2018).

The world's biggest mining companies are again poised to shower investors with billions of dollars and make deals, a turnaround fueled by the global economy's renewed appetite for raw materials and by the burgeoning electric-vehicle market.

Four of the world's top publicly listed miners -- BHP Billiton Ltd., Rio Tinto PLC, Glencore PLC and Anglo American PLC -- have rebounded after plummeting prices for commodities several years ago led them to cut costs, slash dividends and dump assets. Collectively, these companies' market values have increased by about $200 billion in two years.

Investors stand to benefit. Analysts expect Glencore, Anglo and BHP to report large increases in profits when they announce earnings this week. BHP is expected to return $4 billion in cash to investors this year, according to Macquarie Group Ltd., and Glencore will likely announce a payout of about $2.2 billion, UBS Ltd said.

Rio Tinto said this month that its yearly net profit almost doubled to $8.76 billion, as the British-Australian miner increased dividends and announced a new $1 billion share buyback. "I don't think anyone is going to have any cause for complaint," Rio Tinto Chief Financial Officer Chris Lynch said in an interview.

Rising commodity prices have driven the comeback, while the mining giants also reap the benefits of sustained cost cuts undertaken during the industry downturn a few years ago. Copper has risen 20%, gold is up 8.9% and coal has climbed 12% over the past 12 months.

The metals market has been buoyed by a rare period of synchronized economic growth in China, the U.S., Europe and major economies elsewhere. Also helping: a chilly Chinese winter that fueled coal purchases, the industry's expectations of a global infrastructure push and a weaker U.S. dollar, which is the currency used to buy most commodities. A weakening dollar allows international buyers to purchase more.

Rising expectations of a coming surge in electric-vehicle sales have also increased demand for the raw materials used to make the vehicles' batteries. Cobalt, an important ingredient in lithium-ion batteries, has more than doubled in price over the past year. The price of nickel, another key ingredient, is up 20%.

So far, the big miners haven't indicated they will use their windfalls to boost production or launch new projects, which they did during the last boom to the tune of $1 trillion, according to Sanford C. Bernstein research. Instead, they have played it safe by reducing the debt on their balance sheets and returning cash to shareholders.

"At the moment the mantra is all 'value over volume'...rewarding shareholders for their patience and not getting carried away," said Bernstein mining analyst Paul Gait. "We will see how long it lasts."

The industry's buoyant mood was evident at its biggest annual gathering earlier this month in Cape Town, South Africa, where much of the chatter was about deal making, which had dried up during the downturn. An "Investment Battlefield" stage was set up at the conference to allow small companies to pitch projects to investors.

By contrast, executives had struggled to put on a brave face about the future at the 2016 conference, and attendance from supporting industries was thin. Back then, Glencore was aiming to raise at least $10 billion to reduce its debt by eliminating its dividend, and was also mothballing mines, issuing $2.5 billion in new stock and selling assets. Anglo had announced plans to sharply scale back its business, including plans to shed 85,000 employees.

Times have changed. Last year, Glencore approached Bunge Ltd., a $10 billion crop trader and processor, with a takeover proposal, evidence of its being among the industry's most aggressive deal makers. Rio Tinto says it is looking for deals. But mining executives say it's still a tough market for acquisitions, since few companies are eager to sell what appear to be increasingly profitable businesses as commodity prices keep ascending.

"You are not going to steal assets in this day and age," Rio Tinto's Mr. Lynch said.

Still, there remain serious challenges for the big miners. BHP, the world's largest diversified mining company, faces a push from activist investor Elliott Management to change its dual-listed, London-Sydney structure. BHP says Elliott's proposals would do more harm than good.

Big miners are also contending with some African countries looking to cash in on the boom. The Democratic Republic of Congo, the world's biggest cobalt producer and Africa's largest copper producer, recently passed a mining code that will take a bigger slice of miners' profits. The chairman of Congo's state mining company, Gécamines SA, said the industry should be nationalized for the public benefit.

"A bigger piece of the cake, that's the ultimate goal," Gécamines Chairman Albert Yuma Mulimbi said in an interview.

Write to Alexandra Wexler at alexandra.wexler@wsj.com, Scott Patterson at scott.patterson@wsj.com and Rhiannon Hoyle at rhiannon.hoyle@wsj.com

 

(END) Dow Jones Newswires

February 20, 2018 18:13 ET (23:13 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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