BHP launches $39 billion bid for Anglo American

April 25, 2024

The world's largest mining company, BHP Group, has proposed a $39 billion buyout of Anglo American.

It is a big bet on copper by BHP and would be the largest merger in the mining industry in more than a decade. Should the merger be completed, it would give BHP roughly 10 percent of global copper mine supply cementing BHP's position as the top producer ahead of copper-focused Codelco and Freeport-McMoRan.

This comes at a time in which demand for copper is expected to rise dramatically. Leading commodity trader Trafigura recently reported that it expects 10 Mt (11 million st) of additional copper consumption over the next decade. This surge in demand comes from various sectors, including electric vehicles, power infrastructure, artificial intelligence, and automation.

"The energy transition is only just getting started, and if electricity is the lifeblood of this revolution, copper is the veins and arteries," said Peter Arkell, chairman of the Global Mining Association of China (GMAC) told Reuters. "There is no way that existing mines can meet the anticipated demand, therefore the major mining companies recognize that copper needs to be a fundamental part of their portfolio."

Global refined copper consumption grew 6.7 percent in 2023 to 27.63 Mt (30.45 million st), World Bureau of Metal Statistics data showed.

Global refined copper demand will rise at a compound annual growth rate of 2.3 percent from now through 2028, according to London-based commodity research firm CRU.

That robust demand outlook is coupled with unexpectedly tight supply of copper concentrate this year, fuelled by the December closure of First Quantum Minerals' massive Cobre Panama Mine.

Also in December, Anglo American cut its copper production guidance by up to 190 kt (210,000 st) for 2024 and as much as 163 kt (180,000 st) for 2025, citing lower grades and ore hardness at the Los Bronces mine in Chile, pushing analysts to revise their market balance forecasts.

CRU predicts a shortage of 176 kt (194,000 st) for global copper concentrate and a shortage of 135 kt (149,000 st) for refined copper this year, and analysts have said they expect the concentrate deficit to widen over the next three years.

Craig Lang, an analyst at CRU, said some miners are struggling to maintain production levels as mines age, which would encourage them to acquire other assets. Smelters are also likely buy stakes in mines in order to secure offtake, he added.

BHP said in a statement that purchasing Anglo would give it value-adding copper growth options.

"BHP has talked about getting more copper for a long time," said Hayden Bairstow, head of research at Australian broker Argonaut. "Anglo's got plans to go to a million tonnes per year in the next 10 years."

Anglo American has long been viewed as a potential target among the largest miners, particularly because it owns attractive South American copper operations at a time when most of the industry is eager to add reserves and production. However, suitors have been put off by its complicated structure and mix of other commodities from platinum to diamonds, and especially its deep exposure to South Africa.

Bloomberg News reported that Anglo has faced a series of major setbacks over the past year as prices for some of its key products plunged, while operational difficulties have forced the company to slash its production targets — driving down its valuation and leaving the company vulnerable to potential bidders.

The company said in a statement that its board was reviewing the proposal, which it confirmed after Bloomberg first reported BHP’s interest.

Photo: An aerial view of Anglo American's Los Bronces copper mine at Los Andes Mountain range, near Santiago city, Chile on November 17, 2014. REUTERS/Ivan Alvarado/File Photo/File Photo




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