De Beers in the firing line as BHP bids for Anglo American

Duncan Wanblad, CEO, Anglo American

De Beers could be on the chopping block along with Anglo American Platinum and Kumba Iron Ore if BHP’s all-share offer to take over Anglo American Corporation succeeds.

News of the takeover offer was broken last night by Bloomberg and confirmed by Anglo which commented it had received an unsolicited all-share merger proposal which was conditional on the company splitting off its South African platinum and iron ore units.

No mention was made of De Beers, but former leading diamond analyst James Allan told Miningmx, “I would be surprised if De Beers is also not put up for sale because it does not appear to fit into BHP’s business strategy.”

The reasons for BHP not wanting Anglo’s platinum and South African iron ore businesses are two-fold.

Platinum does not fit into BHP’s main “bulk commodity” businesses with the group being the world’s largest miner owning the world’s largest resources of copper and second largest resources of nickel sulphide.

While BHP is a major iron ore producer it does not want to have exposure to South Africa which is why Kumba has to go despite being a profitable business.

BHP got rid of its former interests in South Africa in manganese, thermal coal and aluminium years ago when it divested them to its shareholders through the creation of South32.

According to BHP chairman Ken Mackenzie “the world needs copper for renewable energy, nickel for electric vehicles and iron ore and higher-quality metallurgical coal for steel to build new infrastructure.

“And we are moving into potash, which will be vital to food security and more sustainable farming to support a growing population.”

While platinum clearly has a role to play in the energy transition – particularly if the long-touted growth of fuel cells ever comes about – BHP does not want the exposure to South Africa that taking over Anglo’s platinum mines would mean.

De Beers main operating mines are located in Botswana with its only South African asset being the Venetia mine in Limpopo province.  That means the South African “stigma” should not apply in BHP’s assessment but a luxury, speciality business like diamonds again does not fit into BHP’s overall business strategy.

So the driving factors for BHP would be to get hold of Anglo’s copper interests in South America as well as the Minas Rio iron ore operation in Brazil while Anglo’s much criticised development of the Woodsmith potash project in the UK must also be of interest.

According to Bloomberg, BHP produced about 1.2 million tons of copper in 2023 on an equity basis while Anglo produced 826,000t which would give the combined group about a 10% share of global mine supply.

Bloomberg quoted Jefferies LLC analysts as saying, “if BHP does indeed continue to pursue this deal we would be surprised if other bidders do not emerge” and noted “it’s also possible that the proposal for Anglo could now prompt others to make a move.

“No 2 miner Rio Tinto Group has also been investing in copper production while Glencore Plc last year made an unsuccessful offer for Teck Resources Ltd which has a coveted copper business before eventually reaching a deal for the Canadian company’s coal assets.”