SYDNEY: Days after BHP Group failed to secure the US$49bil takeover of smaller rival Anglo American Plc, investors have one message for chief executive Mike Henry: Keep your cool.
BHP argues it showed restraint in the battle for Anglo, a welcome attribute in a sector notorious for burning billions of dollars on underwhelming projects and ill-timed acquisitions just over a decade ago.
The question now is whether that discipline holds, even with all mining bosses gunning for more volume in copper, the single most coveted metal as the energy transition accelerates.
The Anglo tilt was an ambitious bid to transform the world’s largest miner into the top global producer of the red metal in one fell swoop.
Having faltered, people familiar with the matter said BHP won’t rush into more – at least in part because there are few alternatives when it comes to copper.
Major deposits are increasingly rare and costly to develop, and the obvious acquisition targets are effectively out of reach, either because of ownership or valuation.
Anglo comes back into view in six months time under UK Takeover Panel rules, and BHP will wait until then and reconsider its options, said the people, who declined to be named as the discussions are not public.
“What is in BHP’s portfolio is going to take time to deliver and it’s not going to be cheap.
“That was one of the reasons why they saw an opportunity in Anglo to take their interest in three key assets in Chile,” said David Radclyffe, managing director at Global Mining Research.
“Copper is one of those commodities everyone wants to be in, the problem being there aren’t many of those assets and it’s incredibly hard to deliver them.”
The battle over the past weeks has mesmerised the mining sector.
A tussle between two of the industry’s largest players, it would have been the most significant tie-up in over a decade – and one of the most complex to boot.
Under BHP’s all-share proposals, Anglo would have had to spin off its South African platinum and iron ore assets, before then being purchased by the Australian mining giant.
Anglo’s board rejected the repeated offers, and opted instead for its own turnaround plan. That makes the next six months – and beyond, given the intricacy of Anglo’s plan – crucial.
If the rescue blueprint falters, the company may be back on the table at a lower price. If it succeeds, Anglo may end up closer to the copper-focused company BHP had sought in the first place.
The trouble for BHP is that down the line other bidders will also step in, including rivals Rio Tinto Ltd and Glencore Plc.
Neither is perfectly positioned today, but both may well be later this year, as investors and executives warm to the idea of deals and Glencore completes its acquisition of Teck’s steelmaking coal business. All are eager to bump up copper production.
Industry bankers and executives have reviewed deals centred on the industrial metal for years, running the rule over copper-heavies like Antofagasta Plc, First Quantum Minerals Ltd and Freeport-McMoRan Inc.
But either family owners or expensive valuations have held back approaches, especially in an industry where shareholders remember past profligacy only too well. — Bloomberg