Investors have been waiting years for the copper price to break out of the narrow $US8000 to $US9000 a tonne range it has been stuck in, which has kept a lid on the valuations of miners of the metal.
But Mr Cleary believes BHP’s bid will trigger a sustained rally in copper stocks both in Australia and abroad.
“The deal just has great look-through for the whole copper sector and will be a catalyst for equities to keep moving higher,” he said.
Indeed, copper stocks have already begun to lift and were a key driver for improved returns among resources funds in March following a soft 18-month period.
And fund managers are betting that the wave of M&A deals that flooded through the gold sector, headlined by Newcrest’s $26.2 billion merger with US giant Newmont, has now officially hit the copper industry.
“BHP’s offer brings a sense of urgency to the entire sector that the M&A cycle is starting to kick off and companies who think they have an indefinite amount of time before they move on a neighbour run the risk of leaving things too late,” said Sam Berridge, portfolio manager of Perennial’s natural resources fund.
It comes as mining companies increasingly look to purchase operations rather than build them themselves given the elevated costs associated with exploring and developing mines.
Terra Capital founder Jeremy Bond is on the hunt for smaller developers in North America which he believes could be appealing to the major miners looking to enhance their copper exposure.
“There’s some really interesting development assets there which look compelling, particularly if you’re a bigger company looking to buy rather than build,” Mr Bond said.
