There were a number of points to examine regarding Freeport Copper & Gold Inc’s $9 billion purchase of two energy companies. Sadly, it doesn’t appear that the Corporate Media has latched onto any of them.
One report characterized this deal as:
…a bold bid to diversify into the U.S. energy sector as copper’s prospects wane.
While this quote does absolutely nothing to explain the Freeport deal, it does perhaps come close to a record for cramming the most idiocy into a fourteen word sentence-fragment.
Let’s begin with the suggestion that “copper’s prospects” have waned. Has anyone heard the government of China (or any of the other Asian Tigers) proclaim that they planned to “stop growing” their economies? Has anyone ever heard of a modern economy which could develop itself without large amounts of copper (particularly copper wiring)?
The ¾ of the world’s population in “emerging economies” are at most ¼ of the way toward catching up with the more technologically advanced West. This means we are still in the early stages of the longest/strongest global economic boom in history. Thus the inference that Freeport is somehow bailing-out of copper production and moving into oil & gas is just silly.
Similarly, the suggestion further into the same article that it has become “too hard to find” new copper projects to develop (and that’s why Freeport is moving into energy) is an absurd interpretation of the actual dynamics here. Unlike oil, no one is talking about “peak copper.” There is plenty of copper in the world. All that has changed is that as the richest deposits get mined-out these mega-producers have been forced to move toward lower-grade projects – in order to find the mega-tonnages that these mining giants lust over.
Here we get to the true purpose of the Freeport deal: hedging. What we are supposed to believe here is that none of the business news reporters from Forbes, or Reuters, or these other Corporate Media enclaves understand that mining companies use lots of energy. Apart from wages, energy costs are far-and-away the largest cost of production.
As lower-grade copper deposits (in the future) make copper miners like Freeport even more energy-intensive companies, and Peak Oil ensures that energy prices will increase at least as fast as copper prices; this is not a “bold move” at all. Rather, it would be reckless for these mining giants to forge ahead with their operations without some strategic plan in place to mitigate against rising energy prices...
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