SYDNEY/LONDON, April 25 (Reuters) - British multinational miner Anglo American (AAL.L), said on Thursday it had received an all-share buyout proposal from the world's largest listed mining company, Australia's BHP Group (BHP.AX). London-listed Anglo American, which owns mines in countries including Chile, South Africa, Brazil and Australia, had a market capitalisation of $36.71 billion as of Wednesday's close, according to LSEG data.The deal, if agreed, would give BHP access to more copper, one of the most sought after metals in the clean energy transition, and potash, two of its strategic commodities, as well as more coking coal in Australia.
It could also trigger a wave of transactions for any unwanted assets such as iron ore, nickel and diamonds, where Anglo owns 85% of industry giant De Beers."There can be no certainty that any offer will be made nor as to the terms on which any such offer might be made," Anglo American said in a statement, adding the unsolicited proposal is non-binding and highly conditional.The company said its board was reviewing the proposal and did not disclose the share ratio on offer.
BHP declined to comment when asked about earlier reports about preliminary talks with Anglo American.A deal would be conditional on being preceded by separate demergers by Anglo American of its entire shareholdings in Anglo American Platinum (AMSJ.J), and Kumba Iron Ore (KIOJ.J), to its shareholders.Under UK takeover rules, BHP has until May 22 to make a firm offer.BHP, best-known for mining iron ore, copper, nickel and coking coal, had a market capitalisation of about $149 billion as of Wednesday.
If the Anglo American deal came to fruition, it would be the second major acquisition for BHP in about a year after its 2023 purchase of Oz Minerals. Anglo American said in February it would embark on a review of assets after a 94% plunge in annual profit and a series of writedowns. It has seen a fall in demand for most of the metals it mines and took a $1.6 billion impairment charge on its De Beers diamond business.
The global mining sector has seen a recent slew of merger and acquisitions despite rising concerns around the economic outlook of one of the world's largest metals buyer, China.
More broadly, M&A activity has registered an uptick in the first few months of this year, including mega deals.Both of the mining firms have recently identified potash as an important business which would complement their mining operations as food demand grows.BHP is currently focusing on its Jansen potash project in the Canadian province of Saskatchewan whereas Anglo American has its hopes on the Woodsmith potash mine in Yorkshire.
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BHP wants AAL's copper, not PGM or De Beers or iron ore or met coal or nickel. I discuss the Woodsmith potash project below.
The offer of BHP scrip for AAL dilutes BHP's shareholder base, though long-term AAL holders would likely take nothing less.
Here is AAL's latest Q output, from their website: Cu is very attractive with good operations in Peru and Chile producing ~800ktpa. and a third of AAL's business. A definite positive addition to BHP's production profile in this essential metal.
Ni is nice, though prices are weak on recent large additions to production in Indonesia. Forecasting demand is fraught - steelmaking demand is certain, yet how much will be needed for batteries? There are at least 100 viable permutations and combinations of materials for batteries, so I struggle to see any particular mineral as a 'choke point' in battery production, even as production balloons mightily. Synergies with NickelWest would be minimal. Sell.
PGM is a difficult sector to judge, even though these are critical minerals. AAL's operations are globally significant yet what will demand look like as ICE vehicle production is phased down/out? Demerge and list it.
The De Beers diamond business is a curious beast with an alluring halo due to decades of successful marketing. As a stand alone business listed on the LSX, it will command a significant (irrational) premium.
Then there is the wild card - the Woodsmith potash project. AAL's website says:
Anglo American is developing the Woodsmith project in the north east of England to access the world’s largest known deposit of polyhalite. The Woodsmith project is located on the North Yorkshire coast, just south of Whitby, where polyhalite ore will be extracted via two 1.6 km deep mine shafts and transported to Teesside via an underground conveyor belt in a 37 km tunnel, thereby minimising any environmental impact on the surface...
Holy Smoke! A 37km tunnel is a big spend to placate adjoining residents.
On polyhalite, Wiki says: Polyhalite is an evaporite mineral, a hydrated sulfate of potassium, calcium and magnesium with formula: K2Ca2Mg(SO4)4·2H2O.
The only polyhalite mined in the world comes from a layer of rock over 1,000 m (3,300 ft) below North Yorkshire and extending off the North Sea coast in the UK, deposited 260 million years ago. In 2010, the first mining operations of this polyhalite mineral layer commenced at Boulby Mine, and the mine is in 2023 the only producer of polyhalite, marketed by Israel Chemicals as Polysulphate. In 2016, Sirius Minerals announced plans for the Woodsmith Mine in the area. In March 2020, the Woodsmith project was taken over by Anglo American plc and construction of two 1,500 m (4,900 ft) shafts to reach the 230 feet (70 m) mineral seam is underway. These will reach a mineable area of around 25,200 hectares (62,000 acres) and Woodsmith Mine will be the deepest in Europe. Polyhalite extraction is expected to begin in 2027.
Polyhalite is used as a fertilizer since it contains four important nutrients and is low in chloride: 48% SO3 as sulfate. 14% K2O as from sulfate of potash. 6% MgO as from magnesium sulfate. 17% CaO as from calcium sulfate. ___________________
Potassium Sulphate is a superior form of potassium fertiliser compared to Potassium Chloride, which green leafy vegetables will not tolerate. It commands a substantial premium due to the difficulty in processing Potassium Chloride with Sulphuric Acid to make the stuff. BHP's Jansen project is Potassium Chloride and Woodsmith would be highly complimentary.
BHP is very interested in Woodsmith, though accurately valuing the project is beyond me.
So, a takeover would be messy with many threads to tie off. BHP would not be doing this on a whim. We shall see.
Ash
BHP Price at posting:
$45.23 Sentiment: Buy Disclosure: Held
(20min delay)
