BHP has confirmed a possible $60 billion acquisition of mining giant Anglo American. What does such a deal mean for the sector? Australian Mining investigates.
The announcement
The frenzy began yesterday morning when Anglo released a statement saying it had received an “unsolicited, non-binding and highly conditional combination proposal” from BHP.
The proposal comprised an all-share offer that would require Anglo to spin-off its entire shareholdings in Anglo American Platinum and Kumba Iron Ore to Anglo American shareholders.
The confirmation
BHP immediately chimed in with its own statement confirming it had made a proposal on April 16.
The Big Australian said under the terms of the proposal, ordinary shareholders of Anglo American would receive 0.7097 BHP shares for every Anglo share, as well as ordinary shares in Anglo Platinum and Kumba.
A deal would ring in at a total value of approximately £25.08 ($48.12) per Anglo ordinary share, including £4.86 ($9.33) in Anglo Platinum shares and £3.40 ($6.53) in Kumba shares, with a total value of £31.1 billion ($59.6 billion).
BHP said the terms of the proposal would carry a 31 per cent premium on Anglo’s implied market value.
“The combination would bring together the strengths of BHP and Anglo American in an optimal structure,” BHP said.
“The combined entity would have a leading portfolio of large, low-cost, long-life Tier 1 assets focused on iron ore and metallurgical coal and future facing commodities, including potash and copper.”
What’s next?
BHP has been vocal in its hunger for copper, which it sees as a kingmaker commodity as nations turn to net-zero technology.
A successful acquisition of Anglo would see BHP dominate the world’s copper market and shore up its coal presence in Queensland thanks to Anglo American Australia’s Capcoal and Aquila mines in the Bowen Basin, which increased production by seven per cent in the March quarter.
On Tuesday, Anglo announced copper production at its newly minted Quellaveco mine in Peru grew 11 per cent in the March quarter.
Anglo expects Quellaveco to deliver around 300,000 tonnes of copper per year across the first ten years of operation.
A deal would also significantly add to BHP’s iron ore foothold, with the March quarter seeing Anglo’s Minas-Rio operation in Brazil welcome a four per cent production boost.
BHP has until May 22 2024 to make a firm offer, setting the sector abuzz with what could shape up to be the biggest mining deal in recent history.
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