The natural resources industry is once again witnessing a wave of large-scale mergers and acquisitions. First, it was the acquisition of Canada’s largest diversified mining company, Teck Resources Ltd (TSX: TECK.A, TECK.B) (NYSE: TECK) by Glencore. Now, the world’s largest mining company, BHP Group (NYSE: BHP), is seeking to acquire Anglo American (LON: AAL).
On Wednesday evening, Anglo American confirmed that it had received an unsolicited, all-stock merger proposal from BHP. Anglo American stated that the proposal from BHP is non-binding and conditional upon the prerequisite that Anglo American should first spin off its platinum and iron ore business in South Africa before the implementation of the acquisition.
The highlight of this potential acquisition between BHP and Anglo American is the metal copper.
The electrification trend has led to a growing demand for battery metals, especially copper, a fact that BHP has evidently recognized as an opportunity. In 2023, BHP’s copper production was approximately 1.2 million metric tons, while Anglo American’s production stood at 826,000 metric tons. If the merger is successful, it would create the world’s largest copper miner, with the combined entity contributing to approximately 10% of global copper production.
Anglo American has significant copper mining operations in South America, and through this acquisition, BHP aims to further expand its presence in Chile and Peru, two major copper-producing nations. This acquisition is expected to give BHP ownership of four large-scale copper mines: Collahuasi (44% ownership), Los Bronces (50.1%), El Soldado (50.1%), and Quellaveco (60%), increasing the company’s copper exposure by approximately 40%.
In May of last year, BHP completed the acquisition of Australian copper producer OZ Minerals for 9.6 billion Australian dollars, marking its largest transaction in over a decade. This move aimed to expand BHP’s presence in the critical materials used in clean energy and electric vehicles.
BHP’s valuation of Anglo American stands at 31.1 billion pounds (approximately 39 billion US dollars), equivalent to 25.08 pounds per share, representing a 14% premium over its closing price on Wednesday. However, Jefferies analyst Christopher LaFemina suggests that a serious merger negotiation would require a purchase price of at least 28 pounds per share, and if other bidders enter the scene, the price could soar to well over 30 pounds. Jefferies values Anglo American at 42.6 billion US dollars, a 28% premium over its current market capitalization, which the firm considers a reasonable starting point.
