By Romel S. Gurky
Copper production is expected to become a key growth engine for the global mining industry in 2025 as major companies shift their capital allocation strategies, according to new research from Wood Mackenzie.
The consultancy’s latest metals and mining corporate analysis highlights a sector-wide pivot toward reinvestment in production, particularly in copper, amid subdued returns from share buybacks and heightened competition for capital.
Three core factors are driving the shift: rising non-discretionary capital expenditure, a need for financial resilience against market volatility, and copper’s increasing role in both growth and diversification plans.
“Valuation multiples are not responding to higher payout ratios, and buybacks are no longer delivering strong returns,” said James Whiteside, head of corporate for metals and mining at Wood Mackenzie. “Diversified companies seeking relevance through big payouts aren’t being rewarded. The message from copper miners is that investing in production growth pays.”
Read also: Copper demand to surge by 70% by 2050, BHP reports
In 2024, major miners recorded a decline in buyback volumes, with many firms seeing notional returns turn negative. As a result, companies are expected to lower shareholder distributions and prioritize capital expenditure in growth projects.
Wood Mackenzie projects that major copper producers will collectively reinvest more than 100% of their operating cash flows over the next three years. Large diversified miners are forecast to establish a new norm of allocating over 50% of cash flows to reinvestment, with distributions falling to around 45%.
Greenfield copper projects are seen as offering the most attractive returns. However, not all miners have robust project pipelines, creating a divergence in strategic approaches.
Rio Tinto is pursuing a range of growth projects across multiple commodities, including copper (Oyu Tolgoi), iron ore (Simandou), aluminum (AP60), and lithium. The company’s reinvestment rate could reach 60% by 2025.
BHP, meanwhile, is advancing copper expansion efforts in Chile, with potential final investment decisions expected in 2025. Beyond its Jansen potash project in Canada, the company has fewer large-scale opportunities and is expected to maintain a more conservative strategy, potentially resulting in lower leverage than its peers.
“Miners are entering a new era of capital discipline,” said Whiteside. “Companies that successfully balance growth investments with returns to shareholders will be best positioned for the evolving market.”
Editing by Alexander Ginting
