BHP continues to circle London-listed diversified miner Anglo American, despite the rejection of its sweetened second offer of US$43Bn earlier this week.  

BHP, the world’s largest listed miner, has targeted its smaller rival because of the attractiveness of its Chilean and Peruvian copper mine assets, and future projects pipeline, resources vital to the global energy transition. The second hostile bid was rejected against the backdrop of the 2024 IWCC Joint Meeting with copper producers, a closed-door industry event and conference, held this year in Washington DC. The takeover battle has coincided with a period of intense copper price volatility, with COMEX prices breaching the record landmark US$5/lb level earlier this week.

The Board of Anglo American has unanimously rejected the improved offer, arguing that it significantly undervalued both the company and its future prospects. However, as a direct consequence of the hostile approach. the Anglo American Board has felt compelled to accelerate its plans for the partial breakup of the company, in order to deliver its streamlined standalone strategy. 

This involves a sharpened focus on its growing its copper mine business, to enable the global energy transition, at the expense of several other operations. It, therefore, plans to divest its steelmaking coal business, demerge its South Africa platinum operations (“Amplats”), divest or demerge its De Beers diamond business, and explore options for its nickel mines. Shareholders had previously argued that the inherent value of Anglo American’s copper mine assets had been suppressed by the inclusion of these less valuable operations. These proposed divestments would yield annual cost savings of US$1.7Bn.

The potential merger would create the world’s largest copper producer with a global market share of 12%. Whether the larger entity would be more efficient and successful in executing the faster delivery of new brownfield or greenfield mine projects is perhaps debateable. Moreover, is a bigger and more powerful Western producer needed to counter the growing purchasing power of China, which accounts for 55% of the global copper market, is another important matter to consider. China’s copper industry already openly negotiates collectively through the China Smelters Purchase Team (CSPT) to secure the best buying terms for concentrates. Would not a merged BHP-Anglo American entity, be better able to secure a fairer deal for its own output of copper concentrate in a future global marketplace? 

The battle and arguments will rumble on, but not for long. BHP must declare its intentions, to either proceed or abandon the proposed takeover, by 5pm on Wednesday 22^nd May, just one week from today.