By CLARA FERREIRA-MARQUES

Rio Tinto will be first on the spending trail. The Anglo-Australian giant and peers like BHP have been steadily churning out cash, but investors have understandably fretted this will be wasted on overpriced deals — as happened during the last boom. Expect that to change in 2019.

Rio boss Jean-Sébastien Jacques has multiple reasons to concentrate on copper. Long-term, the price outlook is more appealing than its current main focus, iron ore. With big new deposits rare, slow and expensive, supply of the red metal will eventually lag demand as the world further electrifies. In the short-term, though more a gauge of sentiment, copper for three-month delivery was trading around $6,100 in December, below the level required to encourage miners to dig for more.

What Jacques needs is a target. The most likely candidate is $15 billion Freeport-McMoRan. The world’s largest listed copper producer faces a debate over who will lead it when current boss Richard Adkerson, 71, retires. It also operates largely in the right places — Chile and Peru, plus the United States, which will put off rival Chinese suitors.

For Western names, Freeport’s exotic mines have been poison pills. But it sold Congo’s Tenke Fungurume in 2016, and has unpicked a knot in Indonesia too. Grasberg is one of the world’s richest mines but challenging, and Rio agreed to sell its own interest in 2018. Having agreed to cede its majority stake to a local group, though, Freeport has also paved the way for an eventual full exit.

There are complications. One is price: Freeport’s shares are worth roughly a fifth what they were in 2011, but copper deals are so scarce that Rio may have to pay a premium of at least 30 percent. That would mean an equity value of over $19 billion, representing a punchy 17 times expected 2019 earnings. Still, back-of-the-envelope calculations imply a return on investment roughly in line with a 10 percent cost of capital, even without cost savings.

Rio would certainly have to woo investors. But its debt burden is light. Plus, it could spin off some of the U.S. mines. It could also accelerate efforts to list a majority stake in Iron Ore Company of Canada.

Jacques has other options, like First Quantum or even the Latin American copper assets of Anglo American, if a long-awaited carve-up happens. But Freeport is his most obvious quarry.

First published Dec. 20, 2018.