The Elements of Innovation Discovered
The Elements of Innovation Discovered
Metal Tech News - April 25, 2024
BHP's bid to buyout Anglo American comes during a sharp rise in copper prices as energy transition demand outpaces supply.
The proposed merger between BHP Group Ltd. and Anglo American plc would create a $200 billion mining behemoth that would control 10% of the global production of copper, a metal that has experienced a 23% price spike since early February on supply concerns.
"As part of its strategy to expand its copper assets, BHP intends to acquire Anglo American realizing the significant growth potential for copper in the future, as momentum shifts towards replacing conventional fossil fuels with the increasing adoption of electric vehicles and growing demand for its usage in construction and renewable energy projects," said Sathiya Narayanan Jalapathy, business fundamentals analyst at GlobalData.
Benchmark Mineral Intelligence, which is adding copper to the battery materials and rare earth elements it already covers, says buying out Anglo American is the path of least resistance when it comes to growing its production of future-leaning metals.
"The proposed merger is to gain access to Anglo American's strategic resources, copper in particular," said Yongcheng Zhao, principal copper analyst at Benchmark Mineral Intelligence. "A lack of new mined copper resources is a major obstacle for the energy transition and mining companies are facing growing resistance to building new mines, forcing them to merge to achieve growth."
The roughly 1.3 billion tons of copper produced by BHP, combined with the 826,000 tons produced by Anglo, accounted for roughly 10% of the copper produced globally in 2023.
While the merger would boost BHP's copper production, Benchmark points out that this shifting of assets does little to resolve the underlying shortages of this critical energy transition metal.
"The proposed deal highlights miners' desperation to boost production through acquisitions, rather than through organic growth, in order to reap the benefits of the growing supply gap," said Piotr Ortonowski, project manager at Benchmark. "However, this solution does little to bridge the supply gap itself."
If successful, the merger would also significantly increase BHP's production of nickel and manganese, metals used in the lithium-ion battery powering EVs and storing renewable energy, as well as the platinum group metals used to produce hydrogen.
Given that the merger is the largest in the history of mining, resulting in a company worth somewhere around $200 billion having control of roughly 10% of the world's copper supply, BHP's proposed takeover of Anglo is sure to draw antitrust scrutiny.
Analysts also see the potential for other mining giants, such as Rio Tinto or Glencore, to make competing offers for Anglo.
Whether or not there is a competing bid, it is likely that Anglo will counter with an offer that is better for its shareholders.
Anglo said its board is currently reviewing the BHP proposal.
With more than 16 years of covering mining, Shane is renowned for his insights and and in-depth analysis of mining, mineral exploration and technology metals.
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