Copper Frenzy: BHP’s Pursuit of Anglo American’s Prized Assets
As the world shifts towards cleaner energy, copper has become the coveted metal of choice. Its multiple uses, from power to construction, have sparked intense interest among diversified miners. BHP, the world’s largest miner, has set its sights on Anglo American’s prized copper assets in Chile and Peru.
A Premium Worth Paying
To make a successful takeover bid, BHP would need to offer a minimum 40% premium over Anglo American’s current share price. This comes after Anglo’s value has been boosted by asset sales, including the sale of coal assets and shares in its South African platinum unit. Investors and banking sources estimate that a premium of at least 15-20 pounds per share, including a cash component, would be required to make any offer compelling.
Anglo’s Strengthened Balance Sheet
Anglo American has strengthened its balance sheet, receiving almost $6 billion in cash from its restructuring efforts. Its shares have rallied by over a fifth in the last 12 months, while BHP’s stock has lost almost the same percentage. This has made Anglo a more attractive target, with investors anticipating rival bids for the restructured company.
The Challenge of Making a Compelling Offer
BHP’s CEO, Mike Henry, has stated his aim of maintaining spending discipline, making it a challenge to come up with an offer that could succeed. Investors agree that it would be difficult for BHP to make a strong bid without compromising its financial discipline.
A Window of Opportunity
While there may still be a window of opportunity for a deal, it is narrowing. BHP’s chairman, Ken MacKenzie, recently stated that the company had “moved on” from pursuing Anglo, but this was quickly contradicted by the company. BHP’s CEO, Mike Henry, has reiterated the company’s focus on making more of its existing resources.
The Attraction of Anglo’s Assets
Anglo American’s copper assets, including the Collahuasi, Quellaveco, and Los Bronces mines in Chile and Peru, are highly sought after. The company aims to raise output to about 1 million metric tons of copper by 2030, making it an attractive target for rivals.
Investor Expectations
Investors in Anglo American expect to capitalize on a higher premium as the company is re-rated closer to a pure-play copper producer. However, some investors want to see the strategy fully implemented before considering any takeover offers.
A Hefty Offer?
Some Anglo investors believe that BHP could renew its bid after the company completes the spin-off of Anglo American Platinum in mid-2025. An investment banker cited the premium Rio Tinto offered to acquire Turquoise Hill Resources in 2022 as an example of a “hefty offer” that could be acceptable to Anglo investors.
The Future of Copper
As the demand for copper continues to grow, the pursuit of Anglo American’s prized assets is likely to intensify. With BHP’s focus on extracting more copper from its existing mines, the company will need to weigh the costs and benefits of making a renewed bid for Anglo American. One thing is certain – the copper frenzy is far from over.
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