SYDNEY/LONDON The world's largest miner BHP Billiton is sitting on an $11 billion cash pile and what CEO Andrew Mackenzie does with the money will be a critical test of his ability to invest during the industry's worst downturn in decades.
Announcing plans this week to slash its dividend and shore up its balance sheet, the mining giant said repeatedly that it would consider "opportunities" - cranking up the rhetoric, even as it warned of prolonged price pain.
One of a generation of conservative mining bosses brought in after years of breakneck growth, former BP executive Mackenzie is not an empire builder by nature. He has not done a single major acquisition since he took the reins at BHP in 2013.
But with indebted miners Anglo American and Freeport-McMoRan under unprecedented strain, bankers say some of the world's most coveted copper mines could become available - testing Mackenzie's deal-making mettle.
"It's not quite a war chest, but who knows what might come under distress in this sort of environment," the BHP boss told investors and analysts, when asked about the $11 billion.
Only a few deals and only one metal - copper - can expect to meet BHP's tough requirements for an adequate return. Copper is the most sought-after industrial metal, as existing mines age and new ones are found in increasingly difficult locations.
But the buy-or-wait debate, say investors, bankers and analysts, is gathering steam inside some of the industry's largest players, who are already facing calls from some quarters to make the best of a terrible market.
"This is exactly what BHP should be doing. Using their strength of balance sheet to make bottom of cycle acquisitions and during boom times pay out most of their earnings - rather than buy and or invest at top of cycle," said Paul Xiradis, chief investment officer of Australia-based Ausbil Investment Management, which owns BHP stock.
The world's mining giants were heavily criticized in the years after the 2008 financial crisis, accused of making ruinous acquisitions and - worse - pursuing costly mine projects at the top of the market, fuelling over-supply when the market could least afford it.
But as the cycle hits bottom, steep spending cuts have left BHP, a mining behemoth, pumping in enough cash to stay in business but, some analysts argue, not enough to grow. That puts the question of whether to wait or to buy firmly on the table: is the time now, or is it a decade too soon?
"(BHP) have a strategic dilemma," one industry banker said.
Anglo, Freeport and Glencore have all put assets on the block as part of efforts to cut debt. For now, advisers say none of those meets BHP or indeed chief rival Rio Tinto's requirements - some are not copper, others are too small or in risky jurisdictions once seen as pioneering and now frowned upon.
But if Anglo and Freeport fail to find buyers for what they have got for sale now, bankers say better mines could come up.
More likely, according to industry advisers, the companies will be reluctant to sell crown jewels and would put themselves in play, alongside copper-heavy players like Lundin Mining, or First Quantum, already under the scanner.
All of this could be good news for BHP and even more so Rio, which has its own $9 billion of cash and is facing calls to grow in copper to diversify a portfolio dominated by iron ore.
Anglo and Freeport both have prize assets in Latin America - for Anglo, Chile's Los Bronces, and for Freeport, Cerro Verde in Peru and a majority stake in the El Abra mine in Chile.
For now, analysts say Mackenzie's comments could be aimed at putting the acquisitions issue up for debate, well ahead of any deal - real or potential. It is certainly a fair distance to any actual deal, given the high price tags of recent acquisitions.
The last three significant deals - most recently, the acquisition of an extra stake in Freeport's Morenci mine by Japan's Sumitomo - were done at an implied copper price of well over $7,000 a tonne, bankers and analysts estimate, compared to current prices of closer to $4,600.
That could make any deal a stretch for BHP, which needs to keep cagier investors on board and is also trying to assuage rating agencies to keep its single A credit rating.
"I think frankly that BHP and Rio are still trigger shy. But we are seeing them on the edges - they are starting to explore whether this makes sense," a second industry banker said.
(Reporting and writing by Clara Ferreira Marques in MUMBAI; Additional reporting by Eric Onstad and Simon Jessop in LONDON; Editing by Raju Gopalakrishnan)