Diversification is good. Any aspiring actor or musician will have been told to find a back-up if the dream of filling Wembley or booking the next Marvel series doesn’t work out. Mining companies are coming back around to that approach after years of ‘non-core’ asset sales and simplification.
That trend was a natural response to a downturn, which ran until around 2016, but has left London's majors at the mercy of iron ore and copper market gyrations. That has been to their advantage this year amid high metal prices, but any supply increase or demand deterioration in these markets could sink profits quickly.
To help guard against this, BHP (BHP) and Rio Tinto (RIO) have recently approved massive new projects outside their traditional areas. This marks a turning point in the sector. Anglo American (AAL) was ahead of the curve by buying out Sirius Minerals last year when it was on the verge of collapse, although Anglo already had a more mixed portfolio than the two giants of the sector.