BHP-Anglo American potential merger: It’s all about copper

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to buy Teck Resources , Canada’s largest diversified miner, appears to have been just the beginning of a new wave of major mergers and acquisitions in the natural resources sector. An electrified world has become increasingly dependent on battery metals, particularly on copper, and BHP is, not surprisingly, eager to secure a leading position in this market. A tie-up would give the mining giant about 10% of global copper production.

“If we include our estimate of synergies on an after-tax present value basis, we estimate Anglo fair value to be 2824p per share, which equates to a $42.6 billion equity value. That is 28% above the most recent Anglo share price, and we believe it is a reasonable starting point.” “The deal would represent the biggest shakeup of the global mining industry in more than a decade,” says James Whiteside, metals and mining research director at Wood Mackenzie. “But Anglo American shareholders may consider fair value closer to the share price in 2023 before operational issues emerged and other suitors may be compelled to act at this price.”

“BHP is likely drawn by the company’s low valuation , with the company going through a multi-year operational restructuring,” Fitch Group said. “From a strategic standpoint, bigger is always better in the metals and mining sector.” Earlier on Thursday one of Anglo’s 20 largest shareholders, Legal & General Investment Management, said BHP’s approach was “highly opportunistic” and “unattractive”.

The Anglo-owned Quellaveco and BHP-owned Antamina mines are key to Peru’s economy. If the merger is successful, both operations would be under the same ownership, raising questions of a potential market concentration issue or even a major political concern.

 

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