BHP $38bn Anglo-American bid is 'all About Copper'

BHP Group has made a US$38.8bn bid for Anglo American, a deal that would create the world's biggest copper miner, were it to go through.

Australian multinational mining and metals public company BHP is the world's largest listed miner, and has 80,000 employees and contractors worldwide. It is best-known for mining iron ore, copper, coking coal, potash and nickel.

Anglo American is a London-based British multinational mining company, and is the largest producer of platinum, accounting for 40% of global output. It is also a major producer of diamonds, copper, nickel, iron ore, polyhalite (a mineral used in fertilisers) and steelmaking coal.

Reuters reports BHP as saying it will carve out Anglo-American’s iron ore and platinum assets in South Africa, where it has no assets.

The proposed deal, if agreed, would create a copper mining group with around 10% of global output. If it goes ahead it would also be likely to trigger further transactions in the global mining industry.

Anglo-American 'reviewing BHP proposal'

Anglo, which owns mines in countries including Chile, South Africa, Brazil and Australia, has said it is reviewing the proposal, which it describes as “unsolicited, non-binding and highly conditional”.

Over the past year, Anglo American has seen a 31% drop in earnings, which it blames on writing down its platinum and nickel divisions after a commodities slump. 

"This is all about copper," Tribeca Investment Partners Portfolio Manager Ben Cleary told Reuters. Tribeca holds shares in both BHP and Anglo.

The BHP-Anglo proposal is the latest in a series of mergers and acquisitions prompted by the desire to focus on metals seen as critical to the global energy transition.

"I think it's a good deal for BHP,” Cleary added. “This is going to set the whole sector on fire." 

The deal, if agreed, would give BHP access to more copper, one of the most sought after metals for the clean energy transition.

Clean energy driving up copper prices

Copper prices on the London Metal Exchange have surged 15% this year, approaching $10,000 a ton and two-year highs on demand.

Copper’s conductivity gives it a pivotal role in global electric vehicle (EV) production. The average EV contains over three times the volume of copper than used in an internal combustion engine. Public service vehicles, such as buses, need ten times as much. 

Technological developments – such as AI and automation – are also driving demand for copper cable used to conduct electricity.

Then there’s the development of power grids in China and India. Together, these countries account for almost half the world’s population, and this is also a strong driver of the demand for copper. 

But as demand for copper continues to rise, globally the supply of it has been compromised by sustained underinvestment in the sector, a paucity of new discoveries and mine shutdowns.

Compromised LatAm copper production a problem

Compromised copper supply streams in South America is also an ongoing issue. 

A fall-off in copper production in Chile – the world’s largest producer of copper – has been caused by lower ore grades, water shortages and delays to major investment projects.

Peru, the world's second-largest copper producer, has been hit by social unrest. 

In Panama, meanwhile, the biggest copper mine, First Quantum Mine, is in a dispute with the government over taxes, and the Cobre Panama mine – one of the world's largest open-pit copper mines – was ordered to shut down in December 2023 after mass protests around environmental protection.

Anglo has copper mines in Chile and Peru, where BHP also has operations, and their combined output would amount to around 2.6 million metric tons a year, pushing it well ahead of US-based Freeport-McMoRan.Anglo's 2024 copper production guidance is 730,000 to 790,000 tons. BHP is targeting copper production of between 1.7 million and 1.9 million, reports Reuters.