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BHP wants to takeover Anglo American in a $60 billion deal<\/strong> \u00a0<\/p>\n Rumours BHP (ASX:BHP)<\/a> was preparing for a major M&A splash that would shake up the entire mining world have done the rounds since 2021, when it reportedly set up a BD division to scour for copper and nickel majors in line with its \u2018future facing commodities\u2019 pivot.<\/p>\n The strongest mutterings at the time centred on Glencore, something which became eminently more achievable after BHP consolidated its Australian and British business registrations into one, boosting the simplicity of its scrip.<\/p>\n But instead its sights were set lower, following up the 2022 consolidation with a $9.6 billion cash takeover of OZ Minerals to create a new copper province in South Australia.<\/p>\n Now its loftier ambitions seem to have been realised in a proposal to acquire Anglo American for $60b in BHP scrip, minus the hiving off of South African operations in Kumba Iron Ore and the AmPlats PGE business \u2014 a hard sell to investors given bargain barrel prices for platinum, rhodium and palladium.<\/p>\n It\u2019s also hard to imagine BHP keeping hold of the De Beers diamond business, which will go under strategic review after the deal is wrapped up, unless it places a high premium on being able to stick shiny diamond pics on its Instagram.<\/p>\n \u00a0<\/p>\n The deal has been framed as an attempt to make BHP the world\u2019s largest copper producer, with combined output of 2.6Mtpa pushing it well beyond rivals Freeport-McMoran and Codelco, Chile\u2019s state-owned miner.<\/p>\n Indeed, it is Anglo American\u2019s troubles with hitting copper targets (including a 200,000tpa guidance hit announced late last year) that have both helped lift copper prices and made it vulnerable to a takeover. Lower commodity prices and production disappointments have helped halve its value since April 2022.<\/p>\n The deal includes one of the largest and longest life new copper mines in Peru\u2019s Quellaveco \u2014 roughly equivalent to BHP\u2019s three mine South Australian portfolio on its own with a 36 year mine life and 300,000tpa production profile for its first decade of existence.<\/p>\n But there\u2019s also the high grade 24Mtpa Minas Rio iron ore mine \u2014 subject to a potential JV with BHP\u2019s Brazilian rival and Samarco JV partner Vale. It could be ramped up to 31Mtpa, well above the 27Mtpa share of the still to be constructed Simandou mine held by Rio Tinto (ASX:RIO)<\/a>, with a deal on the table for Vale to take a 15% stake that would also enable the development of the Serra de Serpentina resource held by Vale adjacent to the mine.<\/p>\n And there\u2019s 16Mt of coking coal, which would add to BHP\u2019s ~50Mtpa half-owned JV with Mitsubishi and pose an interesting quandary for investors given the Big Australian has elected to sell off coal mines Daunia, Blackwater, Poitrel and South Walker Creek in recent years to Whitehaven Coal (ASX:WHC)<\/a> and Stanmore (ASX:SMR)<\/a> in deals worth a combined US$5.4b.<\/p>\n \u201cBHP has spent the last 10 years simplifying their asset base only to buy one of the most complex portfolios in the industry,\u201d Wood Mackenzie\u2019s mining research head James Whiteside says.<\/p>\n \u201cHowever, this deal is all about copper and when greenfield options look limited and expensive it makes sense for BHP to look for more workable solutions.<\/p>\n \u201cThe notable pivot here is the move away from a myopic focus on future facing commodities with premium quality metallurgical coal regaining priority status in the company\u2019s portfolio.\u201d<\/p>\n Majors investing big in M&A means they can grow output in copper and other commodities without having to do the hard yards of making a new discovery on their own. This lack of discovery, ironically, could stoke higher prices for commodities like copper which are expected to see a big lift in demand from the energy transition.<\/p>\n \u201cThe proposed deal highlights miners\u2019 desperation to boost production through acquisitions, rather than through organic growth, in order to reap the benefits of the growing supply gap,\u201d Benchmark Mineral Intelligence project manager Piotr Ortonowski said.<\/p>\n \u201cHowever, this solution does little to bridge the supply gap itself.\u201d<\/p>\n The coking coal aspect of the acquisition has been mooted as a potential trigger for a spinoff as well, which would leave BHP almost entirely leveraged to iron ore, copper and its new potash project Jansen as it pivots its portfolio to focus on green technology and more ESG friendly industries.<\/p>\n \u00a0<\/p>\n There are a few risks to the deal, which BHP needs to formalise by May 22.<\/p>\n Firstly, BHP will face some resistance from its own shareholders, who are historically gunshy when it comes to takeovers.<\/p>\n Secondly, the price is such there could be opposition from other miners hoping to gain a bigger foothold in the copper market \u2014 Rio Tinto, Glencore, or Vale for example.<\/p>\n Then there are sovereign risk factors. Anglo\u2019s largest shareholder, with around an 8% stake, is South Africa\u2019s Public Investment Corporation. And BHP\u2019s exit from the country after its takeover of Billiton and subsequent spinout of assets into South32 (ASX:S32) <\/a>still burns into the memory there.<\/p>\n In becoming the world\u2019s biggest copper producer \u2014 around 10% of an otherwise diverse global production line \u2014 also puts it on a collision course with Chile, the owner of Codelco and the host for BHP\u2019s largest copper asset, the 1.1Mtpa Escondida.<\/p>\n The news has already drawn the ire of South Africa\u2019s Mines Minister Gwede Mantashe<\/a>.<\/p>\n Meanwhile, one of Anglo\u2019s largest shareholders has complained the offer is unattractive and reflects the weakness of the London exchange, which it claims is materially undervaluing British listed resource companies.<\/p>\n Rio has its primary listing in the UK, as does Glencore and uranium giant Kazatomprom, though it is otherwise slim pickings, and Glencore has faced pressure from activist investors \u2014 notably Tribeca fundie Ben Cleary \u2014 to shift its listing to the ASX.<\/p>\n \u201cAs with many other UK-listed companies, we believe the valuation of Anglo American to be depressed and regard the proposed exchange ratio as an unattractive proposition for long-term investors,\u201d Legal & General Investment Management head of climate solutions Nick Stansbury told Reuters.<\/p>\n Anglo management is reportedly unimpressed with the offer as well, which has been pitched at a 31% premium to its pre-bid price.<\/p>\n \u00a0<\/p>\n BHP is around 10% of the ASX 200 by market cap.<\/p>\n So the 4.5% nosedive on the Anglo American news was always going to tank the market on a quiet post-holiday Friday.<\/p>\n The materials sector ate a 1.4% fall in morning trade.<\/p>\n Also with news today, Emerald Resources (ASX:EMR) <\/a>announced it will finally head for compulsory acquisition of Bullseye Mining after working its way to a 99.55% holding in the protracted takeover. It\u2019s taken a staggering 871 days to get to this point.<\/em> <\/strong>Hopefully it\u2019s worth the wait for shareholders in the $2.1b Cambodian gold miner, which will finally pick up all of the North Laverton gold project in WA.<\/p>\n Newmont (ASX:NEM)<\/a>, the world\u2019s largest gold miner, announced it had produced 2.2Moz of gold equivalent at all in sustaining costs of US$1459\/oz in the March quarter and generated US$1.4b in cash, declaring a US25cps dividend.<\/p>\n Seems good, although a hefty capex bill of US$850m ensured US$74m flew out the door in negative free cash flow after the Newcrest acquisition was wrapped up.<\/p>\n Newmont says its production will be second half weighted, with the stock surging over 13% today.<\/p>\n Also in the world of gold, Capricorn Metals (ASX:CMM) <\/a>produced 26,017oz at all in sustaining costs of $1515\/oz in March vs 30,399oz at $1333\/oz in the December quarter after a weather affected March at the Karlawinda gold mine.<\/p>\n CMM expects to produce 112,000-115,000oz at $1270-1370\/oz in FY24, but at $1382\/oz, AISC YTD is slightly above guidance.<\/p>\n CMM had $177.8m in the bank on March 31, up from $160.1m at December 31, with cash build of $27.6m before spending on the Mt Gibson gold project\u2019s accommodation camp.<\/p>\n Its shares slid 0.6% as of 1.45pm AEST.<\/p>\n Iron ore junior Grange Resources (ASX:GRR)<\/a> was down ~3% after announcing concentrate production at its Savage River mine in Tassie fell from 684,000t in the December quarter to 586,000t in the March quarter thanks to maintenance.<\/p>\n Pellet sales dropped from 648,000t to 565,000t QoQ, with prices for the premium magnetite pellets falling from US$159.65\/t ($243.14\/t) to just US$08.11\/t ($166.03\/t) FOB Port Latta.<\/p>\n That saw cash and liquid investments and fall from $282.61m with $57.53m for trade payables to $271.96m and $30.37m of trade receivables.<\/p>\n Lower production saw unit costs surge from $132.59\/t to $161.7\/t, making the operations marginal through the quarter.<\/p>\n \u00a0<\/p>\n <\/span>\u00a0<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post Monsters of Rock: BHP\u2019s $60 billion Anglo American gambit far from a done deal<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"
\nBut it\u2019s far from a (cue Miguel voice) Sure Thing, with opposition from rival miners and disdain from Anglo American shareholders to contend with<\/strong>
\nAnd then there\u2019s the ambivalence of its own shareholders, who helped tank the ASX materials sector today<\/strong><\/p>\nNot so future facing<\/h2>\n
Is this a done deal?<\/h2>\n
BHP tanks the market<\/h2>\n
Monstars share prices today<\/h2>\n\n
ASX 300 Metals and Mining Index today<\/h2>\n\n
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