The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Antony Currie

MELBOURNE, March 18 (Reuters Breakingviews) - BHP BHP.AX CEO Mike Henry is leaving a knotty dilemma for his successor. On Wednesday the board of directors revealed that company veteran Brandon Craig will inherit the $180 billion mining firm much changed under Henry's leadership, mostly for the good. But the incoming boss will also have to wrestle with how to reconcile the lure of a big acquisition with the financial discipline set by his predecessor.

On one level, it ought to be no contest in favour of the latter. Henry has kept BHP the lowest-cost iron ore producer while also turning it, via small and mid-size deals, into the world's largest copper miner. The red metal that's key to the global energy transition has just displaced iron ore to account for more than half the company's EBITDA. Craig, currently president of the Americas, has run both operations, as well as the potash unit that is under development in Canada, all ideal training for becoming CEO.

Henry has also simplified the company by selling its oil and gas business to Woodside Energy WDS.AX and eliminating the dual stock listing. And he refused to overpay for Anglo American AAL.L, not once, but twice, despite the enticing prospect of boosting copper resources and slashing costs.

Trouble is, shareholders have not given him much if any credit either for his operational successes or his unwillingness to splash investors' cash around. BHP's stock has risen 48% since he took over at the start of 2020, trailing Rio Tinto RIO.AX and Anglo's 52%, Fortescue's FMG.AX 86% and Glencore's GLEN.L admittedly M&A candidate-hyped 131%, per LSEG data. Lob in dividends and the 170% return under Henry only bests Anglo's and is less than half of what Fortescue owners have enjoyed.

Henry has been hoping that the increasing share of earnings from copper would persuade investors to re-rate the company closer to the average 9 times EBITDA sported by specialised miners of the red metal. But at 6.1 times forward EBITDA, per LSEG, BHP's enterprise trades pretty much in line with its major iron ore and more diversified rivals.

BHP Chair Ross McEwan was at pains on Wednesday to stress any M&A adventure would have to provide "great returns" and would not have to be big. Perhaps over time shareholders will reward BHP for Henry's legwork. The longer they don't, the greater the pressure on Craig to reconsider whether to pay up for a transformational deal.

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CONTEXT NEWS

BHP's board of directors said on March 18 that Brandon Craig is to be the mining company's next CEO. He will succeed incumbent Mike Henry on July 1.

Craig, who has spent more than 25 years at BHP, is currently president of the Americas, overseeing the company's copper and potash operations. Before taking on that role two years ago he ran BHP's Western Australia Iron Ore business.

(Editing by Robyn Mak; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on CURRIE/antony.currie@thomsonreuters.com))