BHP will reconsider its options for a renewed push for Anglo American in about six months’ time, said Bloomberg News citing people familiar with the matter.
Such is the pressure on mining companies to meet future copper demand that they are choosing mergers and acquisitions instead of building their own production, which is taking longer to do and is costly.
“What is in BHP’s portfolio is going to take time to deliver and it’s not going to be cheap. That was one of the reasons why they saw an opportunity in Anglo to take their interest in three key assets in Chile,” David Radclyffe, MD at Global Mining Research told Bloomberg News. “Copper is one of those commodities everyone wants to be in, the problem being there aren’t many of those assets and it’s incredibly hard to deliver them.”
In terms of UK Takeover regulations BHP has to wait out six months before making a fresh approach. This was after Anglo declined to extend discussions about its takeover. It said BHP’s proposal was too risky owing to a complicated deal structure.
If it does return to Anglo, however, BHP may find itself joined by other companies such as Rio Tinto and Glencore seeking to snap up Anglo’s 700,000 tons a year copper production. While neither is perfectly positioned today, both may well be later this year, as investors and executives warm to the idea of deals and Glencore completes its acquisition of Teck’s steelmaking coal business, said the newswire. All are eager to bump up copper.
But investors will be cautious of returning to the days when the mining industry plunged itself into enormous debt, around 2011 following the end of the so-called supercycle – a phenomenon driven the rapid Chinese urbanisation.
“There has been a longer-term positioning by BHP to do more acquisitions, but does that necessarily mean that sort of gives them a blank check to go and do acquisitions at elevated premiums? I don’t think so,” RBC Capital Markets analyst Kaan Peker was quoted by Bloomberg to have said.
