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(Bloomberg) — Copper’s surge to $10,000 a ton just days after the bombshell news that BHP Group is trying to buy Anglo American Plc is highlighting a core disconnect at the heart of the industry: miners just aren’t building enough mines.

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The biggest producers all want to increase copper output to take advantage of rising demand in electric vehicles, grid infrastructure and data centers. BHP has made its $39 billion proposal to buy Anglo American in large part because the world’s biggest miner wants to grow in copper.

Read: BHP’s $39 Billion Bid for Anglo American Was Years in the Making

Yet, that bullishness still isn’t translating into the huge investments involved in developing new pits and shafts and associated infrastructure. A successful takeover would make BHP the biggest copper producer with about 10% of the market, but it won’t make any difference toward meeting the world’s supply needs.

Production from existing mines is set to fall sharply in the coming years, and miners would need to spend more than $150 billion between 2025 and 2032 in order to fulfill the industry’s supply needs, according to CRU Group.

“Copper looks like the last remaining supply risk for the EV industry,” said Bernard Dahdah, senior commodities analyst at Natixis SA. “In a net-zero scenario, we’re going to need a vast amount of copper, and we’re going to need a different strategy to boost supply.”

The question of supply has been the driving force for copper’s 16% rally this year. Unlike the last time that prices hit $10,000, copper demand is relatively tepid for now and the physical market is well supplied.

Read: The Copper Market Grapples With a Crucial Question

Instead, the surge is being fueled by investors betting on looming shortages and the expectation that mining executives and their shareholders aren’t ready to finance and build enough new projects — and would rather buy out their rivals instead.

The reasons behind the underinvestment aren’t new, but they’re all getting worse: high-quality deposits are getting harder to find, and so is funding for small explorers; social and environmental resistance to mining is growing, and the cost of labor, equipment and raw materials has surged. And the handful of miners that have kept building have had a torrid time of late.

Speaking at the copper industry’s annual Cesco Week gathering earlier this month — and one day after BHP had privately made its pitch to Anglo — BHP’s head of copper and potash strategy Laura Whitton gave an assessment of the ways in which copper mining had become more difficult and more expensive.

The world was more reliant on older mines with lower ore grades than in the past, she said. “On supply, there’s a true challenge.”

While the copper market is relatively well supplied for now, investment bank analysts and a growing crowd of hedge fund investors are increasingly bullish on the outlook, believing it has the potential to rally to unprecedented levels over the next few years as the market faces growing shortages.

One key challenge is that new mines take years and often decades to build, and so decisions need to be calculated based on whether copper prices far in the future will justify the investment.

Miners would need $12,000 copper to justify spending on new mines, according to Olivia Markham, who co-manages the BlackRock World Mining Fund. And even then their investors may be reluctant to fund them.

“At a geological level, we have the projects — what we need is the money,” said Dahdah. “The last time copper prices were at $10,000, miners didn’t increase spending, they increased dividends.”

The lessons of the past decade would suggest that if the money does flow, it could come from China, but there are headwinds there too. Chinese-owned miners were responsible for about 40% of the net increases in supply over the past decade, but that looks set to fall to 16% over the next five years, according to McKinsey and Co.

Massive Chinese investment in overseas mining assets has already upended the markets for key battery metals such as nickel, lithium and cobalt, pushing them all into surpluses. Copper is also a key component in EV batteries and motors, but the global market is so large that China won’t be able to solve the industry’s supply challenge on its own.

“There is a clear and compelling need for additional mine capacity to be brought online,” said William Tankard, principal analyst for base metals at CRU. “The gauntlet is being laid down at the feet of the miners, and it’s going to be exceptionally challenging to deliver.”

Copper rose 0.4% to $10,003 a ton on Monday, adding to five weeks of gains.

–With assistance from Jack Farchy, Martin Ritchie and Jake Lloyd-Smith.

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(Bloomberg) — Several of Glencore Plc’s largest shareholders believe that the company should retain its coal assets, according to people familiar with the matter, throwing a proposed spinoff into doubt.

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Glencore, the world’s largest shipper of thermal coal with a market capitalization of about $73 billion, had said it intended to spin the business off within two years of closing a deal to buy the steelmaking coal assets of Teck Resources Ltd.

But major Glencore shareholders believe that the company would be better off retaining its coal business, the people said, asking not to be identified because the information is private. The company’s largest shareholders are former Chief Executive Officer Ivan Glasenberg, the Qatar Investment Authority, and BlackRock Inc.

Glencore’s coal business is one of its most profitable units, driving record returns in recent years, and the plan to exit coal and list a new company in New York represented a major strategic pivot under current boss Gary Nagle. The company had long resisted pressure to follow rivals in exiting the business, arguing that the world still needed the dirtiest fuel and that it was more responsible to run the mines itself than sell them.

Read: Glencore, an Empire Built on Coal, Prepares to Say Goodbye

It’s not clear when and in what form Glencore might put the spinoff to a shareholder vote, with the deal to buy Teck’s coal business yet to close. The shareholders will only form a final view once there is a concrete proposal on the table, and their stance could still evolve, the people cautioned.

While Glencore announced its intention to spin off its coal assets when it agreed to the Teck deal in November, it has since then made clear that the separation would only go ahead if shareholders wanted it.

A Glencore spokesperson referred to comments made by CEO Nagle in February.

“When we announced the transaction, we said our intention was to spin out, and that is our intention,” Nagle told investors. “But it’s always subject to what our shareholders want, and we will consult with our shareholders, and it’s the decision of the shareholders ultimately to do that.”

Glencore’s coal business has long been a source of controversy among climate activists and some investors. In 2020, Norway’s sovereign wealth fund said it had sold its Glencore stake due to the company’s exposure to thermal coal.

When he unveiled the deal to buy Teck’s coal assets in November, Nagle argued that a spinoff made sense because Glencore’s coal and metals businesses would attract higher valuations as separate businesses than as one.

After the spinoff, Glencore’s remaining business would be one of the biggest miners and traders of copper, nickel and cobalt, all essential commodities for the energy transition.

But Glencore’s largest shareholders increasingly view the coal business as a cash cow that strengthens the entire company, the people said, and they see few benefits in spinning it off.

Glasenberg, the company’s largest shareholder according to data compiled by Bloomberg, rose to become Glencore CEO after running the company’s coal business and has long been a fan of the commodity.

Other shareholders like QIA also appreciate the cash flows that coal brings. Some, including BlackRock, might be forced to sell the coal business if it was spun off due to their own policies preventing them from owning coal-focused companies.

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Written by Karen Thomas, MSc, CFA at The Motley Fool Canada

2024 has been an interesting year so far. Despite a backdrop of higher interest rates and stubbornly high inflation, the TSX Composite Index is up 5% so far this year. Similarly, many stocks keep moving higher as they shake off macroeconomic risks and uncertainties. In this article, I’d like to discuss two hot stocks that have outperformed this year and are likely to continue to move higher.

Without further ado, here they are.

Agnico-Eagle Mines stock: +24.3% year to date

Arguably the world’s safest gold mining company, Agnico-Eagle Mines (TSX:AEM), finds itself in a favourable position these days. Years of laser focus on operational excellence and a conservative company risk profile have brought the company years of consistency, stability, and strong cash flows.

Today, the market is noticing like never before. This is because of two things. Firstly, in today’s world of increasing geopolitical turmoil and conflict, investors appreciate that Agnico is not affected by these forces. This is a function of the fact that Agnico-Eagle’s mines are all in politically safe, pro-mining jurisdictions, including places like Canada, Europe, Australia, and Mexico.

The benefits of this are innumerable. For example, Agnico’s mines operate without disruption caused by civil unrest and/or government interference. In turn, this leads to consistently stable results that are only affected by market forces and operational factors. In other words, Agnico is more of a master of its own fate versus other gold companies that have operations in unstable parts of the world.

Secondly, the gold price has rallied 8.5% so far this year. This is a function of inflation and geopolitical turmoil in the world. Gold is the safe haven for investors, after all. In fact, with persistently high inflation and continued geopolitical turmoil, the outlook for the price of gold remains bullish.

This, coupled with Agnico’s record production, has resulted in Agnico-Eagle Mines stock rallying 24.3% so far this year.

Teck: +26% year to date

Teck Resources (TSX:TECK.B) is a $34.5 billion globally diversified mining and metals company. It has operations in places such as Canada, the U.S., Chile, and Peru. Right now, the company’s operations are made up of three segments: copper, zinc, and steelmaking coal, which currently make up the biggest portion of the company’s revenue.

But this is about to change, as Teck has recently sold its coal business in two separate transactions after it was clear that shareholders did not support a spinoff of the business. The sale values the coal business at US$9 billion, which means that Teck will receive a significant cash infusion. This cash will be used for three things: debt repayment, investment to expand its copper business, and a quote “significant” return of cash to shareholders.

Once the sale of its coal business closes, Teck will emerge as a copper-focused company. The company has already been focusing its capital spend on its copper business. In fact, copper production increased 58% in Teck’s latest quarter.

Interestingly, this transformation and focus could not come at a better time. The copper market is expected to be undersupplied over the next few years, as supply disruptions and increases in demand have taken hold. As a result, copper prices have been rallying and are up 18% so far this year.

Looking ahead, with current liquidity of $7.9 billion and the $9.6 billion in cash proceeds from the coal business, Teck has the financial capability to significantly ramp up its copper operations in the next few years. This positions the company really well to benefit from the expected bullish copper market.

The post 2 Sizzling Hot Stocks to Buy Right Now appeared first on The Motley Fool Canada.

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The prospects for the Zacks Mining – Gold industry look bright at the moment on the back of improving gold prices. The yellow metal is likely to gain, fueled by ongoing geopolitical tensions and strong demand.With gold prices anticipated to gain further on demand-supply imbalance, companies like Agnico Eagle Mines AEM, Gold Fields Limited GFI, AngloGold Ashanti PLC AU and Harmony Gold HMY are well-poised for growth, backed by their strong balance sheets, efforts to lower costs and growth initiatives.

About the Industry

The Zacks Mining – Gold industry comprises companies engaged in extracting gold from mines. These mines may be either underground or open pits. Mining is a long and complex process, and requires significant financial resources. It involves exploration to evaluate the deposit's size; assessing ways to extract and process the ore efficiently, safely and responsibly; and developing the mine before the actual mining process. It normally takes 10-20 years for a gold mine to produce material that can finally be refined. Nowadays, industry players use a range of sophisticated techniques to extract gold and convert it into dore bars, an alloy of gold and silver, alongside other impurities. These are then sent for purification, after which gold is purchased as bars or coins or used in jewelry or other purposes.

Major Trends Shaping the Future of the Mining-Gold Industry

Upbeat Gold Prices to Drive Industry Growth: Since the start of 2024, gold prices have risen 13%. Remaining consistently above the $2,000-per-ounce mark, the yellow metal peaked at an unprecedented $2,431.55 per ounce in April. Several factors have contributed to this upward trajectory, including increased geopolitical tensions, a depreciating U.S. dollar, the potential for monetary policy easing, and continuous purchasing by central banks. Physical demand has also been strong in China of late since the weaker yuan, volatile stock market and comparatively low deposit rates have led investors to explore alternatives for their savings.

Efforts to Counter High Costs to Sustain Margins: The industry has been facing a shortage of skilled workforce, causing a spike in wages. Industry players are persistently grappling with escalating production costs, including electricity, water, and material and supply-chain issues. Since the industry cannot control gold prices, it focuses on improving the sales volume and the operating cash flow, and lowering unit net cash costs. The industry participants are opting for alternate energy sources, such as solar or wind farms, to minimize fuel-price volatility and secure supply. Miners are committed to cost-reduction strategies and digital innovation to drive operating efficiencies.Impending Demand & Supply Imbalance to Support Prices: Depleting resources, declining supply in old mines and the lack of new mines have been inherent threats to the industry. Due to the scarcity of discoveries and exhaustive existing resources, miners prefer building up reserves through acquisitions rather than digging new ones that are risky and capital-intensive. On the demand side, the use of gold in energy, healthcare and technology is rising. India and China account for around 50% of consumer gold demand. Economic strength in India is yielding wealth-driven buying. The yellow metal has long been considered a safe-haven investment in financial or political uncertainty. Gold demand continues to be on the rise from central banks. Therefore, there will be an eventual demand-supply imbalance, which is likely to drive gold prices.

Zacks Industry Rank Indicates Bright Prospects

The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. The Zacks Mining – Gold Industry, which is a 35-stock group within the broader Zacks Basic Materials sector, currently carries a Zacks Industry Rank #49, which places it in the top 19% of 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.Before we present a few stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock-market performance and valuation picture.

Industry Versus S&P 500 & Sector

The Mining-Gold Industry has underperformed the S&P 500 Index and the Basic Material sector in a year. The stocks in the industry have collectively grown 0.4% compared with the broader sector’s rise of 4.6%. The S&P 500 has jumped 23.5% in the same timeframe.

One-Year Price Performance

Industry's Current Valuation

On the basis of the forward 12-month EV/EBITDA, a commonly used multiple for valuing gold-mining companies, we see that the industry is currently trading at 6.55X compared with the S&P 500’s 12.57X and the Basic Material sector’s forward 12-month EV/EBITDA of 7.16X. This is shown in the charts below.

Enterprise Value/EBITDA (EV/EBITDA) F12M RatioEnterprise Value/EBITDA (EV/EBITDA) F12M Ratio

Over the last five years, the industry traded as high as 9.26X and as low as 4.63X, with the median at 6.20X

4 Mining-Gold Stocks to Bet on

Gold Fields: The company produced 2.30 million ounces of attributable gold equivalent ounces in 2023, in line with its guidance. For 2024, it is targeting 2.33-2.43 million ounces. GFI recently announced the first gold pour at its Salares Norte mine in Chile’s Atacama province. This achievement underscores the culmination of a 13-year journey from project discovery through exploration and development to production. Salares Norte is a world-class project with one of the industry’s lower-cost profiles and a payback period of less than three years at current gold prices. It will boost GFI’s cash flow profile over the next few years. Despite substantial capital expenditure, primarily attributed to Salares Norte's construction, the company maintains a healthy net-debt-to-EBITDA ratio of 0.42X. Gold Fields has been looking for value-accretive inorganic opportunities to bolster its pipeline. The Tarkwa mine, the flagship asset in its portfolio, is poised to sustain an annual production rate of approximately 500 thousand ounces over the next decade independently. The company is currently making progress in negotiations with the Ghana government for the approval of the proposed Tarkwa/Iduapriem JV with AngloGold Ashanti. If approved, this partnership will unlock operational synergies, enabling higher production rates and grades, thereby extending the combined operation's mine life to at least 18 years.

The Zacks Consensus Estimate for the Sandton, South Africa-based company’s fiscal 2024 earnings has moved up 33% over the past 30 days. The consensus mark indicates year-over-year growth of 64.5%. GFI currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Price & Consensus: GFI

Agnico Eagle Mines: The merger with Kirkland Gold solidifies AEM’s standing as a premier gold producer, backed by enhanced financial resources and a robust project pipeline. Agnico Eagle’s sufficient cash flow is enabling it to maintain a strong exploration budget, primarily focused on Kittila, Canadian Malartic, LaRonde, Kirkland Lake, Hope Bay and Santa Gertrudis. The Kittila mine in Finland is the largest primary gold producer in Europe and hosts the company's largest mineral reserves. AEM continues to expand the exploration drilling of Roura Main, Sisar and Rimpi Zones to take advantage of better grades. LaRonde, Canadian Malartic and Nunavut are expected to be major drivers for cash flow generation over the next several years. A lower debt level contributes to its overall financial strength and stability.The Zacks Consensus Estimate for the Toronto, Canada-based company’s 2024 earnings has moved up 18% over the past 30 days. The estimate indicates year-over-year growth of 24%. AEM has a trailing four-quarter earnings surprise of 16.5%, on average. The company currently has a long-term estimated earnings growth of 16.6% and a Zacks Rank #2 (Buy).

Price & Consensus: AEM

AngloGold Ashanti: In 2023, the company produced attributable 2.593 million ounces of gold, achieving its guidance for the year. It recently completed the acquisition of an 11.7% interest in G2 Goldfields Inc., a Canadian gold mining company with exploration properties in Guyana, South America. This move will provide AngloGold Ashanti with a solid position in one of the world’s key gold provinces with great potential for discoveries. AU produced 2.593 million ounces of gold in 2023 at total cash costs of $1,108 per ounce — within its guidance range. The company delivered strong performances at Sunrise Dam, Iduapriem, Cuiabá, Kibali and Tropicana. The production projection for 2024 is pegged at 2.590-2.790 million ounces of gold. The mid-point indicates growth of 4%. This will be aided by the step-up at Obuasi following the completion of Phase 3 of the Obuasi redevelopment project and at Siguiri, wherein the company expects a year-over-year recovery following the 2023 CIL tank failure. The company expects costs to be flat at the mid-point in 2024, reflecting the continued realization of benefits from the Full Asset Potential review program. The proposed joint venture with Gold Fields mentioned above will help leverage the operating efficiency advantage at Tarkwa and unlock higher gold grades at Iduapriem.The Zacks Consensus Estimate for earnings for the Johannesburg, South Africa-based company’s fiscal 2024 has been revised upward by 61% over the past 30 days. The consensus mark is pegged at earnings of $2.84 per share, whereas it reported a loss of 11 cents in 2023. AU currently flaunts a Zacks Rank #1.

Price & Consensus: AU

Harmony Gold: The company produced 832,349 ounces of gold in the first half of fiscal 2024, which marked a 14% year-over-year improvement. With this performance, the company believes that it is on track to achieve the upper end of the guidance of 1.38-1.48 million ounces of gold in fiscal 2024. The operating free cash flow surged 237% year over year to $381 million in the first half of fiscal 2024, driven by operational excellence and higher recovered grades. The company’s All-in sustaining costs declined 12% year over year to $1,403 per ounce in the first half of fiscal 2024. With this performance, the company has moved down the industry cost curve. HMY also reported an 11% increase in underground recovered grades to 6.29g/t from the 5.68g/t reported in the prior-year period, exceeding its guidance, primarily driven by Mponeng and Moab Khotsong. The company's efforts to reduce its debt levels appear encouraging. HMY’s flexible balance sheet continues to support its investments in its solid growth pipeline.The Zacks Consensus Estimate for earnings for the Randfontein, South Africa-based company’s fiscal 2024 has been revised upward by 11% over the past 30 days. The consensus mark indicates year-over-year growth of 98%. HMY currently carries a Zacks Rank #2.

Price & Consensus: HMY

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Agnico Eagle Mines Limited (AEM) : Free Stock Analysis Report

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Zacks Investment Research

By Clara Denina and Eric Onstad

LONDON (Reuters) -Anglo American's chair will meet its top 30 shareholders to hear views on BHP's $39 billion bid for the miner, he told an annual general meeting on Tuesday, where he was restricted from discussing the spurned offer by takeover regulations.

Anglo rejected the offer on Friday, saying it was opportunistic, significantly undervaluing the company and its future prospects.

Some questions and comments from shareholders echoed broader concerns about the price and nature of BHP's bid.

"To what extent can you survive if you reject the offer?" one shareholder asked.

Chair Stuart Chambers said business was proceeding as usual, having asked shareholders at the start of the AGM for no questions about the bid because the company couldn't respond under restrictions applied by the UK Takeover Code.

The world's biggest listed mining group BHP is considering making an improved offer for Anglo, a source familiar with the matter told Reuters on Saturday.

"It's not the board that decides, but you," Chambers added.

Another shareholder thanked Chambers for rejecting "the comedy offer" from BHP, saying he valued the company at 41 pounds a share.

Under UK takeover rules, BHP has until May 22 to come back with a formal offer after the group said last week it would pay 25.08 pounds per Anglo share, a premium of 31% from the previous day's close.

Anglo shares were down 3.5% at 26.53 pounds on Tuesday.

In February Anglo announced a review of all its assets, after reporting a 94% plunge in annual profit and writedowns at its diamond and nickel operations.

At the time, CEO Duncan Wanblad said the two assets dragging on Anglo's portfolio were its Anglo Platinum and diamonds businesses.

A source told Reuters last week that Anglo was looking for partners for its De Beers diamonds business, which is among the assets BHP has said it would review after completion of any deal.

Last week's bid included a spin out of Anglo's iron ore and platinum assets in South Africa, where BHP has no activities.

(Reporting by Clara Denina and Eric Onstad; Editing by Veronica Brown, Alexander Smith and Jan Harvey)

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The world’s largest mining company has a problem. Australia’s BHP has set out its intention to snap up the rival miner Anglo American in a multibillion-pound deal that would reshape the global industry. Its proposed £31bn takeover plan has already been rebuffed as a lowball offer that undervalues the company. But Anglo’s deep roots in South Africa could be a far more sensitive issue to address.

Africa’s most advanced economy was built on mining. For more than 150 years since the first discovery of diamonds, gold and coal, the industry has remained South Africa’s economic lifeblood. Today it is the world’s fifth largest producer of coal and diamonds and the 10th largest producer of gold.

As a result, Anglo American has held a role at the centre of South Africa’s fortunes, affording the company enormous soft power in the country’s economic and political development. In return, South Africa’s government is Anglo’s largest shareholder, with a 7% stake held via its Public Investment Corporation. A takeover would in effect strip South Africa of a 100-year bond with one of the world’s biggest companies.

“Nobody here views this deal favourably,” said James Lorimer, the shadow minister for mining and natural resources. “Anglo American’s business here was once the jewel in the crown of South Africa’s economy. Under this deal it could be sold off for parts from someone else’s company.”

BHP has made clear that its interest lies in copper. Anglo American’s vast copper reserves in Chile and Peru would make BHP the world’s largest producer of copper at a time when it has never been more profitable.

It is in the extraction of copper – a vital building block in the development of renewable energy projects and electric vehicles – that the mining industry can see a clear path ahead into a low-carbon future.

By contrast, South Africa’s assets are considered a risk rather than a reward. BHP plans to exclude shares in Anglo’s Kumba Iron Ore and its Amplats platinum businesses to reduce its exposure to the South African market, which it exited in 2015 by spinning out the mining company South32. Its subsidiary De Beers, the world’s largest diamond miner, has revealed a slump in production as luxury spending slips and lab-grown diamond alternatives begin to erode its market share.

BHP’s reluctance to forge fresh ties with South Africa appears mutual, if comments made by Gwede Mantashe, the country’s mining minister, are anything to go by. Mantashe, an ANC veteran and former trade union leader, told the Financial Times that he was opposed to the deal because South Africa’s previous experience with BHP was “not positive”. The company “never did much for South Africa”, he said.

Anglo occupies a unique position within the country: it was built on the backs of cheap black labour during decades of institutionalised racial oppression, but its founders also acted as a driving force behind the dismantling of the apartheid state.

Today it uses its considerable lobbying power to urge the government to overhaul its floundering public services, for example by pushing for investment to put an end to rolling electricity blackouts, in an attempt to salvage the country’s economic growth. It has spent more than $6bn (£4.8bn) in the country in the past five years, including investments in South Africa’s underfunded education system – De Beers has for decades sponsored students through university scholarships.

“So many of us have grown up with the idea of ‘rapacious’ mining companies,” Lorimer said. “But in many ways these large listed companies make for better corporate citizens. As big international companies leave South Africa, we run the risk of attracting piratical players who are after profit and not much else.”

Anglo was founded in 1917 by Ernest Oppenheimer, a German immigrant to London who first moved to Johannesburg at the turn of the century as a young diamond broker. He used £1m from UK and US investors to establish Anglo American and within 40 years it was the world’s largest producer of gold, while its twin, De Beers, commanded 90% of the world’s diamond trade.

At the height of Anglo’s industrial power the business magnate also played a role in nudging South Africa’s apartheid government towards constitutional reform. Shortly before his death he offered discreet financial backing to the 156 anti-apartheid activists, including Nelson Mandela, who faced South Africa’s 1956 Treason Trials.

His son, Harry Oppenheimer, assumed leadership of the company and took up his father’s brand of pragmatic liberalism in the late 1950s. He backed proposals for constitutional reform that would water down the ruling National party’s agenda of racial oppression – but he stopped short of supporting the ANC-led liberation movement’s calls for universal franchise.

Still, the company was “indelibly connected” to South Africa’s political reformation, according to Michael Cardo, the author of a biography of Harry Oppenheimer and South Africa’s former shadow minister of employment until his resignation from politics in February.

“Anglo is enmeshed with the history of South Africa in the 20th century – its industrial-economic development as well as its political evolution from a white supremacist state to a non-racial democracy,” he said.

“It would be a matter of some consequence if this deal went through. It would be a significant loss for South Africa which could diminish its status as a major mining player on the world stage. It would speak to the state of South Africa today. The government could well see this deal as a massive blow to the dignity and self-worth of the country. It’s politically significant and speaks to South Africa’s status on the world stage.”

With South Africa just weeks away from what is expected to be the closest democratic election in its history, the loss would be keenly political, too. Lorimer, who is part of the Democratic Alliance, said the deal exemplified the collapse of the economy under the ANC. “We used to have a world-leading mining industry, but now nobody wants to invest here,” he said.

A senior Tory MP is preparing to seek assurances from BHP over whether its attempted £31bn takeover of Anglo American will impact a major mining project in the north of England.

Sir Robert Goodwill, whose Scarborough and Whitby constituency is home to the Woodsmith project, said he would push BHP to reiterate its commitment to the fertiliser mine if its acquisition goes ahead.

The proposed Woodsmith mine in Yorkshire is Britain’s largest private-sector infrastructure project with an estimated cost of $9bn, employing around 1,400 local people.

It is expected to start production in 2027 but analysts at US investment bank Berenberg said BHP can “probably delay the Woodsmith project” given that it already has a separate fertiliser mine in Canada.

The warning from Sir Robert, who is also chairman of the Environment, Food and Rural Affairs Committee, comes after BHP made an unsolicited £31bn offer for Anglo American last week which was rejected.

It has so far failed to convince the London-listed company to sell, although its future remains unclear after it emerged activist investor Elliott has built up a $1bn stake in the business.

Sir Robert told The Telegraph: “If this takeover does go ahead, I’d be very keen to have an early meeting with BHP to seek reassurances that this won’t delay the Woodsmith project.

“They’re ploughing £1m a day into what will be the deepest mine in the United Kingdom, it’s more than a mile deep.

“They’re digging a 23-mile tunnel from Whitby to Teesport. Much of which has been completed.”

He said that if BHP does manage to pull off its acquisition, Woodsmith would serve as the “jewel in the company’s crown”.

Sir Robert added that mothballing the plant “would not be an option given how advanced construction is”.

Anglo American took over the Yorkshire mine after the company completed a rescue deal for Sirius Minerals in 2020.

It has since ploughed hundreds of millions of pounds into the project, which involves extracting a polyhalite, a new fertiliser product, from a mile underneath the North York Moors National Park and transporting it through a 23-mile tunnel to Teesside.

BHP was contacted for comment.

(Adds BHP comment on paragraph 3, comment from Anglo American investors in paragraph 6)

April 27 (Reuters) – BHP Group is considering making an improved offer for Anglo American after its $39 billion initial proposal was rejected by the London-listed miner, a source familiar with the matter told Reuters.

BHP is in discussions on a revised bid for Anglo American to be made in coming weeks, the source said. The deliberations are ongoing and the group has not yet made a decision on the size and structure of the new proposal, the source added.

BHP said it does not comment on what it called "rumour and speculation", while Anglo American did not immediately respond to a Reuters request for comment.

Anglo American rejected BHP's $39 billion takeover offer on Friday, saying it significantly undervalued the miner and its future prospects.

Under UK takeover rules, BHP has until May 22 to come back with a formal offer for Anglo American. It is expected to sweeten its 25.08 pounds per share offer to try to clinch a deal that would create the world's biggest miner of copper, a metal central to the clean energy shift.

Some Anglo American investors, who asked not to be named because of the sensitivity of the matter, told Reuters the company is worth around 30 pounds a share.

Anglo shares closed at 26.43 pounds on Friday.

Much of the focus of BHP's bid has been on copper. A tie-up with Anglo would forge a group accounting for about 10% of global output of the metal, which due to its conductivity and resistance to corrosion is used in everything from electric vehicles and power grids to construction.

A deal, if successful, would be the largest mining takeover globally in 2024 so far and would rank among the top 10 largest deals ever for the sector, LSEG data showed. (Reporting by Rishabh Jaiswal in Bengaluru and Clara Denina in London; Editing by David Evans and David Holmes)

(Reuters) -BHP Group is considering making an improved offer for Anglo American after its $39 billion initial proposal was rejected by the London-listed miner, a source familiar with the matter told Reuters.

BHP said it does not comment on what it called "rumour and speculation", while Anglo American did not immediately respond to a Reuters request for comment.

Anglo American rejected BHP's $39 billion takeover offer on Friday, saying it significantly undervalued the miner and its future prospects.

Some Anglo American investors, who asked not to be named because of the sensitivity of the matter, told Reuters the company is worth around 30 pounds a share.

Anglo shares closed at 26.43 pounds on Friday.

A deal, if successful, would be the largest mining takeover globally in 2024 so far and would rank among the top 10 largest deals ever for the sector, LSEG data showed.

(Reporting by Rishabh Jaiswal in Bengaluru and Clara Denina in London; Editing by David Evans and David Holmes)

(Bloomberg) — BHP Group is considering making an improved proposal for Anglo American PLC after its $39 billion initial offer was rejected by the London-listed miner, according to people familiar with the matter.

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The Australian miner is discussing with its advisers a revised proposal for Anglo American in the coming weeks, the people said, asking not to be identified as the matter is private. BHP is also in the process of discussing the merits of a deal with its key shareholders and trying to convince them to back the offer, the people said.

Read more: BHP’s $39 Billion Bid for Anglo American Was Years in the Making

BHP’s deliberations are ongoing and it hasn’t made a final decision on the size and structure of the new proposal, the people said.

A BHP spokesman declined to comment.

Anglo this week rejected an all-share deal in which it would spin off controlling stakes in South African platinum and iron ore companies to its shareholders before being acquired by BHP. The total per-share value of the non-binding proposal was about £25.08, BHP said. Anglo Chairman Stuart Chambers called the proposal “opportunistic” and said it failed to value the company’s prospects.

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(Bloomberg) — When Mike Henry took over as chief executive officer of BHP Group in 2020, the world’s biggest mining company had lost its swagger.

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Bruised by a series of painful missteps and a run-in with activist Elliott Investment Management, the Anglo-Australian behemoth was kicking crucial decisions down the road, and increasingly aware that its reliance on fossil-fuel-heavy commodities could start turning investors away.

Detail-focused and exacting, Henry didn’t fit the stereotype of the hard-charging and charismatic mining executive that the industry so often turned to for its leaders. But he moved quickly and methodically, and within 20 months BHP had announced the most dramatic shakeup since its creation two decades earlier. The company would sell off its oil and gas business and dismantle a dual listing structure that it had outgrown years earlier; it finally greenlit a giant potash mine in Henry’s native Canada after years of wavering.

BHP also started making a tentative return to acquisitions. The industry’s biggest player had spent years on the M&A sidelines, serving penitence for a series of disastrous takeover bids and deals. So Henry started small. When he found himself in a bidding war, the CEO showed he was willing to walk away. Eventually, BHP worked itself up to a $6.4 billion copper takeover last year.

The decisions of the past few years may appear disparate, but each one, according to people familiar with the matter, was always aiming toward the same goal. For years, it’s been an open secret in the mining industry that BHP’s boss was looking for the “Big One” — a mega-deal to supercharge the company’s copper business.

And now, it’s finally time.

The news this week that BHP proposed a $39 billion deal to partly break up and then acquire Anglo American Plc has set the mining industry alight. The proposal, which Anglo swiftly and forcefully rejected on Friday, would mark the end of one of the world’s oldest mining companies and hand BHP control of some of the best and biggest copper mines at a time when the world is barreling toward a supply shortage.

BHP, which has a market value of about $140 billion, has made copper a central part of its strategy, betting that supply will struggle to keep pace with demand for metal to build electric vehicles, solar panels and high-voltage cables. But the company’s expansion options at its own assets are not enough to offset its retreat from fossil fuels, creating pressure to add new mines from outside. The offer is also sparking predictions that it will set off a wider wave of mining M&A, with many of BHP and Anglo’s rivals scouting for their own copper deals.

But there are huge question marks over whether BHP can pull it off. Henry and his team have come up with a complicated, multistep deal that would ensure BHP only gets the parts of Anglo it actually wants, and minimizes risks for the company. Yet critics are already calling the deal unworkable, and it’s not clear how the CEO’s logic-driven approach will deal with the less predictable real-world realities: even if Anglo can be convinced by an improved bid, BHP will still need to win over regulators in what can be politically charged approval processes.

And Elliott has once again reared its head. Bloomberg reported Friday that the activist has emerged as one of Anglo’s biggest shareholders, introducing a new unknown to the situation in the form of an old adversary.

For Henry, 58, this is the culmination of years of strategizing and preparation. When Anglo suffered a series of setbacks that sent its shares plunging and put its management on the back foot, the CEO of BHP was ready to act, according to people familiar with his thinking. The company has been working seriously on the proposal for months with Henry personally leading the charge, and is undeterred by Anglo’s initial rejection. It’s likely to soon come back with an improved proposal, the people said.

Read: Anglo’s Stumbles Make It Prey for Mining’s Biggest Predator

“He’s spent a long time, very deliberately putting himself in a position where he can now move quickly and opportunistically," said George Cheveley, a portfolio manager at Ninety One UK Ltd., a shareholder in both companies, and who worked at BHP in the mid-2000s. “He's an incredibly hard working, detailed person.”

In discussions with people who know and work with Henry, “detailed” is a word that comes up a lot. He’s often several steps ahead of others, they say, and employees have learned it’s best to admit ignorance rather than trying to bluff their way through a conversation. Decisions are invariably based on cold logic and hard facts.

Born in Canada to a navy family, Henry has Japanese heritage and is fluent in the language, having first worked for Mitsubishi Corp. before joining BHP in 2003. Over the next 17 years he worked his way up through the ranks, running trading and coal operations before taking over the miner’s Australian business, where its biggest and most profitable mines are located.

When Henry became CEO he soon took steps to start cleaning up the company’s portfolio of assets and implementing changes that would ultimately make it easier to pursue a deal when the time came. One of the biggest moves was the collapse of the company’s dual listing, which dated back to its creation two decades earlier when Australia’s BHP Ltd. merged with rival Billiton. In announcing the decision to leave London, he emphasized how it would unleash the company's agility to do deals quickly.

While the changes reshaped BHP, it was still stuck with a major long-term problem: Its business was dominated by iron ore and coal and lacked big enough growth options in copper and nickel, the sort of “future facing” commodities that many investors favor for their exposure to the energy transition.

By early 2022, Henry had beefed up his deal team and issued marching orders — they would start evaluating BHP’s big copper-producing rivals, including Freeport-McMoRan Inc. and Glencore Plc.

For BHP, the prospect of any mega-deal means contending with a history of painful missteps, as the miner has repeatedly fallen short in its most ambitious moves. The company made an audacious $150 billion run at number-two miner Rio Tinto Group that eventually failed, while a $39-billion pursuit of Potash Corp. of Saskatchewan Inc. collapsed when the Canadian government moved against the company. Before Henry took over, BHP's most recent big deal was a hugely expensive foray into shale, which it quickly reversed.

Read: BHP Seeks to Break Mining’s M&A Curse with Thorny Anglo Deal

But Henry also recognized that BHP had missed opportunities in the past and had not been prepared enough or nimble enough to pounce when its rival were wounded. He was determined he would be ready next time.

Cracks Show

It was around the same time — in the first half of 2022 — that cracks were starting to show at one of BHP’s smaller rivals, Anglo American. A few days after new CEO Duncan Wanblad took the helm, the company announced a major setback at its mines, with production falling and costs rising.

But it was over the course of last year that the pressure really built up. Many of the issues were outside of Anglo’s control — the diamond market imploded, platinum prices collapsed and rail and port problems in South Africa have squeezed exports from the company’s cash-cow iron ore business. Anglo is the only major miner with big platinum and diamond businesses and is particularly exposed to South Africa. Its complicated structure — with majority shareholdings in two large, listed South African mining companies — and its unusual product mix have been part of the reason it hasn’t been successfully targeted previously.

The biggest disappointment, however, came in December, when the London-based company announced a big and surprising cut to its copper production, sending its shares plunging. Anglo’s management has been under increasing pressure since then — it started a review of its businesses and faced calls from some analysts and investors to pare back expansion plans or even sell some assets.

Wanblad, a 57-year-old South African, is also a long-time employee, and like his counterpart at BHP is described by employees as deeply analytical.

People close to Henry say he’s been confused by Anglo’s failure to take tough decisions to address its problems. BHP had kept a file on Anglo for years, but the mounting missteps in recent months spurred the company to start looking at a potential deal more seriously, eventually culminating in the proposal first reported by Bloomberg this week.

Separate First

BHP has outlined a deal in which it wants Anglo to first separate out its South African platinum and iron ore businesses — spinning them off to shareholders — before proceeding with an all-share takeover. At last Tuesday’s closing prices, the share ratio would value Anglo at £31.1 billion, according to BHP’s calculations.

It’s easy to see Henry’s focus on detail and logic in the proposal. BHP would only go ahead with the takeover if Anglo completes its exit from the South African companies, simplifying its structure and reducing exposure to a country where miners have long contended with power shortages, logistics disruptions and fractious labor relations. The company has also flagged its intention to put assets including De Beers, the iconic diamond business, under strategic review — generally business speak for “up for sale.”

Anglo has pushed back hard on the design of the deal, arguing that it creates uncertainty and “significant execution risks,” in addition to its assessment that the offer itself undervalues the company. Spinning off the South African businesses would take time, leaving Anglo exposed to changes in commodity prices and other factors— potentially for months — despite already having agreed to a takeover price.

And there are other uncertainties. The deal, which would give BHP roughly 10% of global copper mine output, is likely to raise antitrust red flags, especially in its biggest customer China.

Read: China Could Hinder BHP’s Bid to Become Copper’s Top Producer

Some South African politicians have already reacted negatively to the announcement, raising questions about whether BHP has a strategy to ensure a deal doesn’t turn into a political lightning rod, especially in an election year. While Anglo is listed and headquartered in London, it’s a deeply South African company ingrained with the country’s history, politics and economy.

When the African mining industry gathered in Cape Town in February, Anglo boss Wanblad was one of the keynote speakers, a few hours after President Cyril Ramaphosa took the stage. Nobody questioned the absence of Henry or other senior BHP executives — unlike Anglo, the company doesn't operate any pits or shafts in Africa. But in hindsight, Henry’s absence seems like a curiously missed opportunity to meet with key politicians and other influential figures.

“There's a lot of issues and obstacles to overcome, so we'll have to see,’’ said Professor Frederik Anseel, the Interim Dean at UNSW Business School — one of Australia's leading business universities. “South African government, a bit of competitor analysis, China involvement. Clearly these are hurdles BHP will need to take and I think the first reactions from South Africa were not super positive.’’

Henry will also need to convince his own investors that Anglo’s vulnerability presents a can’t-miss opportunity to snap up valuable copper mines.

And while he’s successfully transformed the company, not all of his strategic moves have paid off. Henry initially championed nickel — a metal used to make electric vehicle batteries — as a parallel commodity to copper. The company looked to expand its existing operations and went on the hunt for deals, but a glut of supply from Indonesia has sent prices plunging, forcing BHP to take a $2.5 billion writedown on its flagship mine and consider shutting it altogether.

But the foray also holds some insight into Henry’s strategy. When its offer for a Canadian nickel project turned into a bidding war, BHP ended up walking away. Company insiders point to this as a differentiator from his predecessors: The ego-driven culture of the past is gone, they say, and BHP would rather lose out on a deal than risk destroying value.

What happens now? Under UK takeover law BHP has until May 22 to either announce a firm intention to make an offer or walk away, and the company is expected to return soon with an improved proposal in the hopes of winning over Anglo’s board and management. Analysts at Jefferies and Co. have suggested the per-share value for the whole company will need to be at least £28 for Anglo to take it seriously and enter talks.

And the arrival of Elliott on the scene presents a potential wild card. The activist hedge fund led by Paul Singer amassed its 2.5% holding in Anglo over recent months, Bloomberg reported on Friday. The firm is known for stepping in to beaten-down stocks and then pushing companies to take measures ranging from share buybacks to outright sales of the business.

Many in the industry believe the BHP offer has fired the gun on a new wave of restructuring for the global mining industry — and one that is almost certain to involve Anglo, whether or not BHP succeeds.

“For a while we’ve felt that within mining there’s probably some consolidation due. While nobody wants to be the one who is consolidated, Anglo are in a position now where they have to make the best of it,” said Chevely, the portfolio manager at Ninety One. “In a year’s time, I don’t think Anglo is sat there as the same company they are today.”

–With assistance from William Clowes, Jack Farchy and Mark Burton.

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Teck Resources (TSE:TECK.B) First Quarter 2024 ResultsKey Financial Results

Revenue: CA$3.99b (up 5.4% from 1Q 2023).
Net income: CA$343.0m (down 71% from 1Q 2023).
Profit margin: 8.6% (down from 31% in 1Q 2023). The decrease in margin was driven by higher expenses.
EPS: CA$0.66 (down from CA$2.27 in 1Q 2023).

earnings-and-revenue-growth

All figures shown in the chart above are for the trailing 12 month (TTM) period

Teck Resources Revenues and Earnings Miss Expectations

Revenue missed analyst estimates by 6.5%. Earnings per share (EPS) also missed analyst estimates by 26%.

Looking ahead, revenue is expected to decline by 13% p.a. on average during the next 3 years, while revenues in the Metals and Mining industry in Canada are expected to grow by 15%.

Performance of the Canadian Metals and Mining industry.

The company's shares are up 6.2% from a week ago.

Risk Analysis

You still need to take note of risks, for example – Teck Resources has 1 warning sign we think you should be aware of.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Release Date: April 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Can you provide an overview of Southern Copper’s financial performance in Q1 2024? A (CFO): In Q1 2024, Southern Copper achieved a robust financial performance with a significant increase in net profit compared to the previous quarter. This was primarily driven by higher copper prices and efficient cost management strategies.

Warning! GuruFocus has detected 7 Warning Signs with MHK.

Q: What are the company’s projections for copper production in the upcoming quarters? A (CEO): We are optimistic about our production capabilities and expect to increase our copper output by 10% in the next quarter. This is due to the completion of our recent expansions and improvements in mining efficiency.

Q: How is Southern Copper addressing environmental concerns related to its mining operations? A (Head of Sustainability): We are committed to minimizing our environmental impact. Recent initiatives include investing in renewable energy projects and water reclamation processes to reduce our carbon footprint and water usage.

Q: Can you discuss any challenges the company faces in its operations? A (COO): One of the main challenges is the fluctuating cost of energy and its impact on operational costs. We are actively seeking alternative energy sources and more efficient technologies to mitigate these effects.

Q: What strategic investments is Southern Copper planning for the future? A (CFO): We plan to invest in advanced mining technologies and expand our exploration activities to new regions. These investments are aimed at increasing our production capacity and ensuring long-term sustainability.

Q: How does the current geopolitical climate affect the company’s operations? A (CEO): Geopolitical tensions, particularly trade policies and tariffs, do pose risks. However, we are strategically positioned to manage these challenges through our diversified operations and strong market relationships.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

Southern Copper (NYSE:SCCO) First Quarter 2024 ResultsKey Financial Results

Revenue: US$2.60b (down 6.9% from 1Q 2023).
Net income: US$736.0m (down 9.5% from 1Q 2023).
Profit margin: 28% (in line with 1Q 2023).
EPS: US$0.95 (down from US$1.05 in 1Q 2023).

earnings-and-revenue-growth

All figures shown in the chart above are for the trailing 12 month (TTM) period

Southern Copper Revenues and Earnings Beat Expectations

Revenue exceeded analyst estimates by 4.4%. Earnings per share (EPS) also surpassed analyst estimates by 28%.

Looking ahead, revenue is forecast to grow 7.3% p.a. on average during the next 3 years, compared to a 4.9% growth forecast for the Metals and Mining industry in the US.

Performance of the American Metals and Mining industry.

The company's shares are up 3.1% from a week ago.

Risk Analysis

Before you take the next step you should know about the 2 warning signs for Southern Copper (1 shouldn't be ignored!) that we have uncovered.

(Bloomberg) — The last time BHP Group took a swing at another major miner, it was Rio Tinto Plc back in 2007. That could have been a blockbuster $150 billion takeover, but with metals prices crashing as the financial crisis took hold and with China signaling its discontent, the plan crumbled.

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Having confirmed a takeover approach for rival Anglo American Plc on Thursday only to have it swiftly rejected, executives at the world’s biggest digger will be wringing their hands. They need a better outcome this time — even with one of the most complex deals the industry has seen in years.

The sector as a whole has a dismal track record when it comes to acquisitions. Caught out by the scale of China’s economic acceleration at the start of the century and desperate to add supply, mining giants went on a shopping spree. The result was that billions of shareholder dollars were incinerated through poor purchases and investments in often overly ambitious, large-scale projects.

BHP is no exception. It failed in a $39-billion pursuit of Potash Corp. of Saskatchewan Inc. It did pull off the $12.1 billion purchase of Petrohawk Energy Corp. in 2011 — but the move into shale proved to be an expensive mistake. It resulted in the early exit of chief executive Marius Kloppers, and BHP ultimately cut its losses and sold out to BP Plc in 2018.

BHP retreated into its role as a conservative heavyweight and flagship Australian company, focusing on cleaning up the consequences of the splurge. It appointed appropriately technocratic leaders and sold assets rather than buying them, spinning off what became South32 Ltd. in 2015. It only began testing the acquisition waters again in 2022, securing the $6.4 billion purchase of copper producer OZ Minerals Ltd.

“The large deals in the past have been hard to deliver, hard to show how they add value. In a number of cases, you roll forward a couple of years and deals are unwound,” said David Radclyffe, managing director at Global Mining Research in Sydney.

“So given that this deal is a complex structure, with complex geographies, and a complex commodity mix — it appears that the real opportunity is copper, BHP just has to take all the rest and deal with that as it can — it does raise a few flags.”

Digging Deep

Eager to cherry-pick the best of Anglo American’s assets outside South Africa and to seize copper assets before the metal’s price really takes off, BHP is betting on an unusually byzantine structure. Its $39 billion all-share offer is dependent on spinning off Anglo American Platinum and Kumba Iron Ore, and it has already said assets beyond copper, metallurgical coal and iron ore would be “subject to strategic review.”

Pulling off such a deal will be tricky.

Buyers for businesses like diamond arm De Beers are not plentiful, and that’s before considering the additional challenge of navigating any sales demanded by global antitrust authorities, as China and other major jurisdictions consider the impact of allowing BHP to become the world’s largest copper producer.

Even when such deals do work, the fallout can be dud assets that weigh on the balance sheet for years. BHP’s 2001 purchase of Billiton — the deal that created today’s miner — took years to clean up.

In large part, the willingness to take on such a drawn out and risky bid is in itself a reflection of the lack of options for miners eager to expand out of steelmaking commodities — which have underpinned profitability for years — and into the ingredients of a green energy transition. That includes many metals where scale is simply too small, and others where there are simply too few assets available to buy — including copper, which broke through $10,000 a ton on Friday for the first time in two years.

“BHP can probably pull this off this time because at least it is the right time in the cycle,” said Matthew Langsford, portfolio manager at Sydney-based Terra Capital, who is interested in copper but isn’t a shareholder in BHP or Anglo American. “We are a long way from large new copper supply coming to market and inventories are low.”

Anglo’s swift rejection — and its shares — suggest BHP will have to pay more to win over Anglo. That will add another layer of complexity, and test the balance between paying enough to capture its quarry and remaining below levels that will rattle shareholders with long memories.

“I 100% agree with the logic. Obviously it’s a complicated deal with what needs to happen, but the thing that worries me with BHP is their propensity to overspend sometimes. Once they’ve made their decision, if it’s got too much friction they generally increase their offer,” said Matthew Haupt, portfolio manager at Wilson Asset Management in Sydney and who is underweight on BHP.

“You wouldn’t expect much more – between 5% and 10%. Even 10% would be a stretch.”

–With assistance from Clara Ferreira Marques, Annie Lee, Yasufumi Saito and Sybilla Gross.

(Updates with Anglo rejection of the deal, copper threshold, comment in paragraph 15)

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By Clara Denina and Melanie Burton

LONDON (Reuters) -Anglo American rejected BHP's 31.1 billion pound ($39 billion) takeover offer on Friday, saying it significantly undervalued the miner and its future prospects.

BHP, which has until May 22 to make a binding bid, is expected to sweeten its 25.08 pound per share offer to try to clinch a deal that would create the world's biggest miner of copper, a metal central to the clean energy shift.

Reuters reported on Thursday, citing two sources, that Anglo's management did not consider the proposal attractive.

"We would need to see more money on the table before we sold our shares," said Todd Warren, a portfolio manager at Tribeca Investment Partners in Sydney, which holds shares in Anglo.

Anticipation among analysts and investors that BHP would increase its offer were reflected in Anglo's London-listed shares, which hit their highest level in a year. They were trading about 3.5% higher at 26.50 pounds at 1612 GMT.

News that activist investor Elliott has built a $1 billion position in Anglo, according to a person with knowledge of the stake, also buoyed the stock.

New York-based Elliott locked horns with BHP in 2017, when it built a 5% stake in the Australian miner and pushed for a series of strategic changes in order to return more cash to shareholders.

Anglo said the BHP deal's complexity created uncertainty and that it was already well-placed to create significant value from assets aligned with the energy transition and other demand trends.

"The BHP proposal is opportunistic and fails to value Anglo American's prospects," Anglo Chairman Stuart Chambers said in a statement, adding that it diluted the value upside for Anglo's shareholders relative to BHP's.

The mining group started a strategic review of its assets in February in response to a 94% fall in annual profit and a series of writedowns caused by lower commodity demand.

Mining has seen a mergers and acquisitions rush as companies seek more exposure to metals needed for the global energy transition, and further consolidation could follow.

A deal, if successful, would be the largest mining takeover globally in 2024 and among the top 10 largest deals for the sector ever, LSEG data shows.

BHP's shares closed 4.6% lower in Australia after the world's largest listed mining group on Thursday offered holders of Anglo shares a premium of 31% to Wednesday's market close.

Investors may also have concerns about the merits of the deal as it faces different regional jurisdictions and some Anglo businesses are lower-margin than BHP's, analysts said.

"It's not clear how BHP adds value to the deal if it is required to offer considerably more," said Brenton Saunders, a portfolio manager at Pendal, of the deal's complex structure.

The Australian group's CEO Mike Henry and other BHP executives including Chief Financial Officer Vandita Pant will brief investors on their proposal next week, fund managers said.

SOUTH AFRICA

A condition of BHP's proposal is that Anglo first distributes to shareholders its stakes in Anglo American Platinum (Amplats) and Kumba Iron Ore, both of which operate in South Africa, where BHP has no assets.

A source familiar with BHP's thinking said those assets would be better managed locally. BHP jettisoned its smaller assets years ago to focus on higher-volume commodities.

Kumba is hobbled by a failing logistics network while Amplats, which faces lower metal prices and falling demand, said in February it was embarking on a restructuring that could affect about 3,700 jobs.

Any exit by Anglo, which was founded in Johannesburg in 1917 and employs more than 40,000 South Africans, would be a further economic blow to the country, whose miners have been cutting jobs and investment as platinum especially falls out of favour.

South Africa's Public Investment Corporation (PIC) holds 6.99% of Anglo American, LSEG data shows, and the government is scrutinising BHP's proposal.

The move comes weeks before a general election in which voter anger about a stagnant economy and high unemployment could cost the long-governing African National Congress its majority.

On Friday, Impala Platinum announced it could cut 3,900 jobs in South Africa due to lower metal prices.

Beyond South Africa, attention turned to potential antitrust hurdles in China, the world's biggest buyer of copper, and in Japan and India, which take BHP's steel-making coal.

Glencore was forced to sell its interest in Xstrata's Las Bambas copper project in 2013 to clear a hurdle set by Chinese regulators for its $35 billion deal.

(Reporting by Clara Denina in London, Melanie Burton in Melbourne, Scott Murdoch in Sydney; additional reporting Archisma Iyer; Writing by Miyoung Kim, Elaine Hardcastle and Alexander Smith; Editing by Sonali Paul, Neil Fullick, Jamie Freed and Catherine Evans)

(Bloomberg) — When former boss Mark Cutifani left Anglo American Plc in mid-April 2022, things had rarely looked better for the century-old miner. Metals prices soared as the world emerged from lockdowns, the company had recently posted its best-ever annual profit and the popular industry veteran was handing over to a trusted lieutenant. Anglo stock hit a record the same day.

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Two years later, the company’s reputation is in tatters. A series of missteps had sent its value plunging by half. And now industry heavyweight BHP Group is moving in.

BHP’s proposal to break up Anglo and cherry pick its best assets marks a humbling moment for the mining house founded by the storied Oppenheimer dynasty and owner of the iconic De Beers diamond business. While analysts broadly expect BHP will need to sweeten its offer — which valued Anglo at about $39 billion — the move is raising existential questions about the future of the company and whether it can continue in its current form.

BHP’s shares closed 2.2% lower in London on Thursday after it announced its proposal, while Anglo’s shares jumped 16%, leaving its market capitalization around the value of BHP’s bid. Dual-listed BHP fell as much as 4.7% in Sydney on Friday, the most since September.

For BHP, the crisis at Anglo has come at the perfect time. The smaller company, which owns a handful of the world’s most desirable copper mines, is suddenly vulnerable just as the industry leader is finally ready to flex its dealmaking muscles, after years of holding back.

And it’s not the only one — other big miners have also been shifting their focus back to acquisitive growth. Anglo has been underperforming at a time when money is pouring into the wider metals and commodities space, and rumors had swirled for months that the floundering miner was in play.

Read: Mega Miners Are Hunting for Deals After Decade on the Sidelines

So when BHP Chairman Ken MacKenzie picked up the phone to his counterpart at Anglo earlier this month to make his proposal, it was a call that Anglo had been expecting for months in some form or other, according to people close to the company.

“Anglo was the most-liked stock a couple of years ago,” said Ben Davis, an analyst at Liberum Capital. “Repeated guidance disappointments and relative underperformance of its commodity basket has left it vulnerable to approaches.”

In many ways, the seeds of Anglo’s troubles months were sown well before Cutifani’s triumphant exit.

Just days after he left, the company announced a major setback at its mines, with production falling and costs rising. And what initially looked like a one-off for an otherwise reliable producer spiraled out from there. Problems multiplied across the portfolio, while Anglo revealed a cost blowout at the flagship fertilizer project the company had bought a few years earlier.

The disasters continued to pile up. Many of the issues were outside of Anglo’s control — the diamond market imploded, platinum prices collapsed and rail and port problems in South Africa have squeezed exports from the company’s cash-cow iron ore business. Anglo is the only major miner with big platinum and diamond businesses and is particularly exposed to South Africa, which means it lagged rivals who weren’t dealing with the same hurdles.

As the pressures built, Anglo’s balance sheet was already stretched by its ambitious plan to build a fertilizer mine in the north of England. Unpopular with some investors, the project — long championed by new CEO Duncan Wanblad — kept getting more expensive and completion further away.

Read: Massive New UK Mine Hinges on a Market that Barely Exists

The real kicker came in December, during a routine update on Anglo’s business. Investors had been expecting cuts in South Africa, which were disappointing but not surprising.

But the market reacted in shock to a much bigger bombshell: Anglo’s South American copper mines — the company’s crown jewels — would need to slash production by roughly 20% to reduce costs. The shares cratered, plunging 19% in a single day.

The company has sought to turn the corner, telling investors it’s reviewing all its businesses. Anglo is open to selling its De Beers mining unit and looking for a partner for the big English fertilizer project.

But its weakness has left the company vulnerable. BHP has made a nonbinding proposal to buy Anglo in an all-share deal that valued the smaller company at about $39 billion based on Tuesday’s prices, BHP said in a statement on Thursday morning. Crucially, BHP wants Anglo to first split off the South African platinum and iron ore businesses, spinning them out to existing shareholders, before a takeover could happen.

Anglo said late Wednesday it was assessing the proposal, confirming it had received an approach after Bloomberg first reported BHP’s interest.

The move is a convoluted way for BHP to get its hands on Anglo’s coveted copper mines, and the clearest evidence yet that the largest producers are ready to dive back into dealmaking. The companies spent much of the past decade under a type of self-enforced ban, after a series of disastrous deals led to billions in writedowns and a cost a series of CEOs their jobs.

Now, flush with cash and having rebuilt investor trust, the industry is turning back to growth — and going in search of copper. The deal proposed by BHP would create by far the world’s biggest copper producer, just as demand for the energy transition is predicted to soar.

Read: An Eye-Watering Squeeze in Copper Ore Is Firing Up the Bulls

BHP CEO Mike Henry, who had transformed the company by getting out of oil and gas, was given a mandate by his board to seek transformational deals, and was already running the numbers on rivals including Freeport-McMoRan Inc. and Glencore Plc in early 2022, Bloomberg reported at the time.

One of the keys for BHP to pull off a deal for Anglo may lie in South Africa. The country’s state pension fund manager is Anglo’s biggest shareholder, and the group’s platinum and iron ore companies are two of South Africa’s biggest listed stocks. (Anglo is the majority owner of both but they have small free floats on the Johannesburg Stock Exchange.)

In a statement on Thursday, the Public Investment Corp. reiterated that the mining sector is of critical importance to the country and that any opportunities that arise need to take this factor into account.

Read: South Africa Mines Minister Signals Opposition to BHP-Anglo Deal

Anglo has long links with the country: Founded in 1917 by entrepreneur Ernest Oppenheimer, Anglo American was built on the back of South Africa’s giant gold mines. Moving into diamonds with control of De Beers after Oppenheimer was elected to the board in 1926 — it owns 85% of the company after selling it and then buying it back — and then adding platinum and coal, Anglo grew rich and powerful through much of the 20th century.

As Apartheid sanctions bit, the company invested more in South Africa, becoming a sprawling conglomerate. Then, as international markets became accessible again, it rapidly grew overseas, building and buying coal mines in Australia, iron ore in Brazil and copper in Chile and Peru.

To be sure, this is not Anglo American’s first crisis. In 2015, the company almost collapsed amid huge debts and tumbling metal prices. Cutifani intially announced plans to sell half its mines, before backtracking as commodity prices recovered.

The difficulties at the time saw Indian billionaire Anil Agarwal grab a 20% stake in the company, which led to two years of deep speculation about his plans for the business. The tycoon ultimately walked away, unwinding his position.

While Anglo survived the attentions of Agarwal, the show of interest from the world’s biggest mining company may be more difficult to move past.

–With assistance from Millie Munshi and Jessica Zhou.

(Updates with share prices in fourth paragraph)

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(Bloomberg) — Copper made a fresh push toward five digits as BHP Group Ltd.’s blockbuster offer to buy Anglo American Plc lent support to bulls who say the metal is headed for long-term shortages and high prices.

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The world’s biggest miner has proposed a $39 billion takeover of Anglo, chiefly targeting its smaller rival’s South American copper mines. The size and timing of the bid — with copper up 16% this year — is a stark sign of how resources giants are trying to muscle in on a commodity that’s crucial to green industries.

“A lack of new mined copper resources is a major obstacle for the energy transition and mining companies are facing growing resistance to building new mines, forcing them to merge to achieve growth,” Yongcheng Zhao, principal copper analyst at Benchmark Minerals Intelligence, wrote in an emailed note.

Copper has surged in April amid optimism about a recovery in global manufacturing, and despite signs of softness in the physical market, especially in China. Investment from hedge funds taking a longer-term view on prices will help to sustain gains, according to Citigroup Inc. analysts.

Goldman Sachs Group Inc. reiterated a forecast that prices will hit an all-time high of $12,000 over the next 12 months, while BlackRock Inc. fund manager Olivia Markham said in an interview Wednesday that miners will be reluctant to push the button on new projects if prices remain below that level.

Copper on the London Metal Exchange rose 0.9% to $9,948 a ton by 11:15 a.m. in Shanghai, having spent most of this week fluctuating just below $10,000 a ton. Zinc was up 1%, while other metals were steady.

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(Bloomberg) — Anglo American Plc has rejected a $39 billion takeover proposal from BHP Group, saying it significantly undervalues the company.

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Under the proposed all-share deal, Anglo would first spin off controlling stakes in South African platinum and iron ore companies to its shareholders before being acquired by BHP. The total per-share value of the non-binding proposal was about £25.08, BHP said Thursday.

Anglo’s rejection was widely expected. Analysts and some Anglo investors had seen BHP’s proposal as well below the sort of price that would bring the 107-year-old miner to the table. BHP will now have to improve its offer if it wants to start talks.

“The BHP proposal is opportunistic and fails to value Anglo American’s prospects,” Anglo Chairman Stuart Chambers said in a statement.

Read More: BHP Makes $39 Billion Anglo Approach to Create Mining Giant

Just two years ago, Anglo was trading at almost £43 a share, but it’s been battered by major operational and market setbacks. Anglo shares were steady in London, after jumping 16% on Thursday.

A tie-up with Anglo would give BHP roughly 10% of global copper mine supply ahead of an expected shortage that many market watchers have predicted will send prices soaring. If successful, the transaction would mark a return to large-scale dealmaking for BHP, while potentially flushing out other suitors aiming to boost their exposure to the metal that’s closely linked to the global energy transition.

Anglo has long been viewed as a potential target among the largest miners, particularly because it owns attractive South American copper operations at a time when most of the industry is eager to add reserves and production. Still, suitors have been put off by Anglo’s complicated structure and mix of other commodities from platinum to diamonds, and especially its deep exposure to South Africa.

BHP had sought to navigate that challenge by insisting that Anglo separate its two South African units as a condition of a takeover.

That suggestion was also was also dismissed by Anglo on Friday, with the company saying it was unappealing to its investors.

“The proposed structure is also highly unattractive, creating substantial uncertainty and execution risk borne almost entirely by Anglo American, its shareholders and its other stakeholders,” Chambers said.

Within 24 hours of BHP’s pursuit coming to light, South Africa — as many have always expected in a deal involving Anglo — has started to move to center stage.

South Africa’s state owned pension fund is the Anglo’s biggest shareholder and yesterday the country’s mines minster signaled his opposition to the deal.

(Updates with shares in fifth paragraph and details throughout)

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Alphabet (GOOG)

Alphabet’s first-quarter revenue jumped 15% as Google’s parent company announced its first-ever dividend of 20 cents a share alongside a $70bn (£56bn) stock buyback.

Google posted $80.5bn in revenue for the first quarter of 2024 and reported $1.89 in earnings per share, up from $1.17 – beating analysts’ expectations on both counts.

The company also announced its first dividend, of $0.20 per share, and said the payout would become quarterly.

“Our leadership in AI [artificial intelligence] research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation,” CEO Sundar Pichai said in the earnings release.

Shares in Alphabet were up roughly 15% in premarket trading. The jump pushed Alphabet’s market cap past $2tn.

Intel (INTC)

Intel reported first-quarter earnings on Thursday that beat Wall Street expectations for earnings per share but the company's Q2 outlook fell short of Wall Street's estimates, sending the stock sliding.

In the first quarter, Intel reported a net loss of $400m, or 9 cents per share, versus a net loss of $2.8bn, or 66 cents per share, last year.

Revenue was $12.7bn versus $11.7bn a year ago, a 9% year-over-year increase.

Intel said it anticipates Q2 revenue of between $12.5bn and $13.5bnn. Analysts were anticipating $13.63bn for the coming quarter. “We are making steady progress against our priorities and delivered a solid quarter,” said CEO Pat Gelsinger.

Microsoft (MSFT)

Microsoft’s heavy bet on AI appears to be paying off as the world’s largest public company reported $61.86bn revenue for the last quarter.

Total revenue increased 17% to $61.86bn during the first three months of 2024, the third quarter of its financial year, surpassing analyst expectations of some $60.88bn. Earnings per share increased 20% to $2.94, ahead of the expected $2.83.

"Microsoft’s AI-powered earnings demonstrate that doubling down on innovation is paying off," Jeremy Goldman, senior director of briefings at Emarketer, told Reuters, pointing to the company's early moves in generative AI, such as its large investment in ChatGPT maker OpenAI.

Sales in Microsoft’s cloud division, its biggest revenue driver that includes its Azure computing platform, climbed 21% during the quarter to $26.7bn, compared with analysts’ forecasts for $26.2bn and above company guidance.

Amazon (AMZN)

Amazon are higher in premarket trading following a pair of strong quarters from mega-cap peers Microsoft and Alphabet.

Amazon is scheduled to report its first-quarter financial results after the US market close on April 30. The company is expected to report earnings of 83 cents per share on revenue of $142.495bn, according to estimates from Benzinga Pro.

Investors should keep an eye out for any fluctuations to the share price at the open following reports that the Federal Trade Commission asked a judge to force Amazon to reveal what it tells company leaders about using the encrypted messaging app Signal to discuss sensitive topics and about preserving documents related to antitrust matters, according to a new court filing.

In September, the FTC filed a suit against Amazon, arguing that the company has illegally maintained a monopoly and artificially raised prices for consumers.

Anglo American (AAL.L)

British mining giant Anglo American has rejected a £31.1bn takeover offer by Australian rival BHP (BHP.L)

The FTSE 100 miner said the bid was “opportunistic” and “significantly undervalues Anglo American and its future prospects”.

The unsolicited approach from BHP would include a structure which “is highly unattractive” for Anglo’s shareholders, “given the uncertainty and complexity inherent in the proposal, and significant execution risks”, the board said.

The bid would have seen BHP pay £25.08 for every Anglo American share, which would include stock in Anglo subsidiaries Anglo Platinum and Kumba Iron Ore.

It would be conditional on Anglo demerging its entire shareholdings in the two businesses to its shareholders.

The board said that it had unanimously rejected the proposal.

Anglo’s shares surged by 16.1% on Thursday after news of the bid emerged, valuing the miner at £31.4bn and above the offer price from BHP.

Watch: Alphabet's dividend an 'olive branch for investors': Analyst

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(Bloomberg) — BHP Group Ltd.’s $39-billion bid to create a global copper giant risks irking its biggest customer China, where authorities have a history of intervening to stymie or water down international mergers.

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A takeover of Anglo American Plc. would catapult BHP into the top spot for copper producers, with 10% or more of the world’s output. That could be a red flag for Beijing, which has long bemoaned China’s weak purchasing power against the miners that dominate trade in raw materials.

“This may invite close scrutiny from a competition perspective, specifically China’s smelting industry,” Bloomberg Intelligence analysts Grant Sporre and Alon Olsha wrote in a note. The deal comes just as Chinese copper processors are struggling to turn a profit on supplies from miners like BHP.

China’s State Administration For Market Regulation didn’t immediately respond to a faxed request for comment.

The potential for Chinese involvement, perhaps by forcing asset sales in exchange for approval, is among a swathe of challenges that BHP Chief Executive Officer Mike Henry faces in pulling off an ambitious but complex deal. Foremost, of course, is Anglo’s rejection of the bid, which it says significantly undervalues the company.

In 2013, Chinese regulators ordered Glencore Plc to offload a major new copper project in Peru to get approval for its $30 billion takeover of Xstrata Plc. Before that, Beijing helped frustrate BHP’s mega-bid to buy rival Rio Tinto Plc, a $147 billion deal that ultimately collapsed.

The Glencore-Xstrata case offers a precedent, according to Ying Song, partner at Anjie Broad Law Firm who has advised international clients in cases involving China’s antitrust authorities.

“For copper production, the Chinese market relies on global supply to a great extent, so my preliminary impression is that this case would be scrutinized under what’s called the normal procedure,” Song said.

The State Administration for Market Regulation, which oversees competition cases, would seek opinion from industry regulators like the Ministry of Industry and Information Technology, as well as experts, downstream consumers and industry bodies such as the China Nonferrous Metals Association.

Copper’s applications in advanced manufacturing and items crucial to the energy transition, such as solar panels and batteries, are likely to sharpen Beijing’s interest in the acquisition, given China’s dominance of the world’s clean energy and electric vehicle sectors.

Other aspects may draw less attention. Although a combined BHP-Anglo steelmaking coal business could account for as much as 19% of all seaborne shipments — most of which end up in China — that’s still less than BHP’s share in 2022, according to Bloomberg Intelligence.

–With assistance from Yujing Liu and William Clowes.

(Updates with comments from lawyer in seventh paragraph)

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(Bloomberg) — BHP Group Ltd.’s bid to spin off Anglo American Plc’s South African assets as part of a takeover proposal shows how the economic policies of the ruling African National Congress have undermined investor confidence in the country, the main opposition party said.

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The offer by BHP envisages Anglo offloading majority stakes in Anglo American Platinum Ltd., the world’s largest miner of the metal by market value, and Kumba Iron Ore Ltd. to shareholders. Anglo on Friday rejected the £31.1 billion ($38.7 billion) proposal by BHP because it “significantly undervalues” the company.

South Africans head to the polls next month in an election in which the ANC is at risk of losing its national majority for the first time since coming to power three decades ago. It’s hemorrhaging support because of voter dissatisfaction with its management of the economy, including the collapse of state rail and port infrastructure that has hampered mining exports.

“You cannot force a business to do business with you or stay in your country or in your jurisdiction,” Dion George, shadow minister of finance for the Democratic Alliance, said at a briefing in Johannesburg on Friday. “This a very sorry indictment of what we have under the ANC government’s failed and misguided economic policy.”

South African Mineral Resources and Energy Minister Gwede Mantashe, who also serves as the chairman of the ANC, signaled his opposition to the proposal.

“I wouldn’t support it,” Mantashe said by phone on Thursday. “I don’t think Anglo will agree to that. I wouldn’t if I was on the board.”

South Africa’s mining industry is already in a fragile state in a country with one of the world’s highest unemployment rates. Platinum mines, including those owned by Anglo’s subsidiary, either have already cut thousands of jobs or are considering following suit. The upheaval that may result from a successful takeover by BHP, which has divested from the country, adds another concern for labor unions even if the shares in the iron ore and platinum units would be distributed among Anglo’s existing shareholders under BHP’s rebuffed proposal.

Ultimately, whoever ends up owning Amplats and Kumba will have to interact with underperforming state-owned power company Eskom Holdings SOC Ltd. and port and rail company Transnet SOC Ltd. Both have impaired mining productivity, from unreliable power supply to a lack of trains to move mineral exports.

“If you look at the political landscape of the country itself, it’s not giving any confidence to any person,” said Joseph Mathunjwa, president of the Association of Mineworkers and Construction Union, the largest labor group in the platinum industry.

Anglo was founded in 1917 by entrepreneur and philanthropist Ernest Oppenheimer on the back of South Africa’s giant gold mines, before moving into diamonds, platinum and coal. Last year, AngloGold Ashanti Ltd. — a company formed in 1998 through the combination of Anglo American’s gold assets — moved its primary listing to New York.

“The problem here with the Anglo sale, the reason why they are doing it, is because they’ve lost confidencBHP Makes $39 Billion Anglo Approach to Create Mining Giante in our economy and they’re buying forward cover in case we have a massive problem after May 29,” George said.

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(Bloomberg) — Elliott Investment Management has built a roughly $1 billion stake in Anglo American Plc, the UK-listed miner that’s received an unsolicited takeover approach from Australia’s BHP Group Ltd.

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The activist hedge fund led by Paul Singer has exposure to almost 33.6 million Anglo American shares via derivatives, according to a UK regulatory filing Friday that confirmed a report by Bloomberg News. The firm amassed the 2.5% holding over recent months, according to people familiar with the matter, who asked not to be identified discussing confidential information.

The investment puts Elliott among Anglo American’s 10 biggest shareholders, data compiled by Bloomberg show. Anglo American shares jumped as much as 6.3% in London after Bloomberg News reported the stake.

Elliott also has a 0.07% short position in BHP, a separate filing shows. Representatives for Elliott and Anglo American declined to comment.

Elliott’s presence in Anglo American’s stock emerges with the mining company the subject of takeover interest from BHP. The Australian miner has proposed an acquisition that values its smaller rival at £31.1 billion ($38.9 billion) and would create the world’s top copper producer. Bloomberg News reported BHP’s approach on Wednesday. Anglo American said the proposal significantly undervalues the company.

Singer’s firm is known for stepping in to beaten-down stocks and then pushing companies to take measures ranging from share buybacks to outright sales of the business.

“We like to see value-driven investors in the register,” said Giuseppe Bivona, chief investment officer at another activist, Bluebell Capital Partners, which built a stake in Anglo American in February. The company “is surely worth much more than BHP is offering.”

Anglo American has long been viewed as a potential target among the largest miners, particularly because it owns attractive South American copper operations at a time when most of the industry is eager to add reserves and production.

But suitors have been put off by its complicated structure and mix of other commodities, as well as its deep exposure to South Africa. In February, Anglo American reported a steep drop in profit and lowered its dividend on the back of falling demand for diamonds and platinum group metals — commodities that are unique to its portfolio.

BHP has proposed an all-share deal in which Anglo would first spin off controlling stakes in South African platinum and iron ore companies to its shareholders.

Read More: Anglo’s Stumbles Make It Prey for Mining’s Biggest Predator

Shares in Anglo American closed 3.2% higher in London on Friday at 2,643.00 pence, giving it a market value of about £32.4 billion. The stock surged 16% Thursday after BHP’s approach. Even after this week’s rally, the stock is still down more than a third from its peak two years ago.

Elliott took a sizable position in BHP in 2017 and pushed it to spin off certain oil assets. In 2021, the miner struck deals that extended its withdrawal from fossil fuels, including a sale of oil and gas operations to Woodside Petroleum Ltd.

Singer’s firm has been involved with other metals companies as well. In 2022 Elliott held talks with Kinross Gold Corp. that resulted in the miner announcing a $300 million share buyback. And it’s the majority shareholder in Triple Flag Precious Metals Corp., which provides financing for mining companies. It’s also setting up a new venture, Hyperion, to invest in mining assets.

–With assistance from Thomas Biesheuvel, Fareed Sahloul and Nishant Kumar.

(Updates Anglo’s closing price in 11th paragraph.)

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Elliott Investment Management has amassed a roughly $1 billion stake in Anglo American Plc, adding another twist to the drama sparked by BHP Group’s unsolicited takeover approach for the mining company, Bloomberg’s Crystal Tse tells Sonali Basak on “Bloomberg Markets.”

Teck Resources TECK reported first-quarter 2023 adjusted earnings per share (EPS) of 56 cents, missing the Zacks Consensus Estimate of 87 cents. The bottom line marked a 58% plunge from earnings of $1.32 per share reported in the year-ago quarter. Gains from increased prices for steelmaking coal and higher copper sales volumes were offset by lower zinc and copper prices and lower steelmaking coal sales volumes. Earnings were also impacted by increased unit costs at the steelmaking and Quebrada Blanca (QB) operations.

Including one-time items, EPS from continuing operations was 48 cents in the first quarter of 2024 compared with $1.65 in the year-ago quarter. This reflected the reduced ownership of Elk Valley Resources (“EVR”), lower copper and zinc prices, and higher unit costs at steelmaking coal and QB operations. Also, finance expenses and depreciation and amortization expenses were higher year over year as the depreciation of a majority of the QB assets has started and interest capitalization ceased.Net sales amounted to around $2.96 billion compared with $2.8 billion in the year-ago quarter. The top line, however, missed the Zacks Consensus Estimate of $2.99 billion.

The gross profit was CAD$1.29 billion ($0.95 billion), marking a 22.6% plunge from the year-ago quarter. The gross margin was 32.3% compared with the year-ago quarter’s 44%.

Teck Resources Ltd Price, Consensus and EPS SurpriseTeck Resources Ltd Price, Consensus and EPS Surprise

Teck Resources Ltd price-consensus-eps-surprise-chart | Teck Resources Ltd Quote

The adjusted EBITDA was CAD$1.69 billion ($1.25 billion), which marked a 14% decline from the year-earlier period. The EBITDA margin was 42.5% in the quarter under review compared with the year-ago quarter’s 52.1%.

Segment Performances

The Steelmaking Coal segment reported sales of CAD$2.37 billion ($1.75 billion), reflecting a year-over-year increase of 1.5%. First-quarter sales volumes were reported at 5.9 million tons, down 5% due to extreme cold weather in January as well as rail impacts in the first two months of the year. This was somewhat offset by higher steelmaking prices.

The segment reported a gross profit of CAD$1.12 billion ($0.8 billion), which was down 12% from the first quarter of 2023 due to higher unit operating costs and lower sales volumes, partially offset by higher realized steelmaking coal prices.

The Copper segment’s net sales surged 41% year over year to CAD$1.08 billion ($0.8 billion) in the reported quarter, attributed to higher production offset by lower copper prices.

Copper production for the first quarter was reported at 99,000 tons, 74% higher than the first quarter of 2023. Copper in concentrate production from QB was at 43,300 tons, reflecting the ongoing ramp-up. Improved performances at Antamina and Highland Valley Copper were offset by lower output at Carmen de Andacollo due to the extreme drought conditions.

The segment’s gross profit was CAD$106 million ($79 million) in the reported quarter, which marked a 59% plunge from the year-ago quarter. This was attributed to lower copper prices and the loss incurred at QB, as it is progressing ramp-up of production and the company has commenced depreciation of the operating assets.

The Zinc segment’s net sales were down 12% year over year to CAD$541 million ($401 million) in the reported quarter as higher production levels were offset by owing to lower zinc prices. The segment’s gross profit marked a significant year-over-year drop of 51% to CAD$63 million ($47 million).

Cash Flow & Balance Sheet

Teck Resources generated a cash flow of CAD$0.04 billion ($0.03 billion), which was substantially down compared with $1.09 billion ($0.8 billion) of cash flow in the first quarter of 2023. The company had cash and cash equivalents of CAD$1.3 billion ($0.9 billion) at the end of the first quarter of 2024 compared with CAD$0.7 billion ($0.5 billion) at the end of 2023. The company’s debt was CAD$6.17 billion ($4.52 billion) at the end of the first quarter of 2024.

TECK returned around CAD$145 million ($107 million) to shareholders in the first quarter through the purchase of CAD$80 million ($59 million) of Class B subordinate voting shares under its normal course issuer bid, and CAD$65 million ($58 million) as dividends.

Guidance

Teck Resources expects steelmaking coal production to be between 24 million tons and 26 million tons in 2024. Copper production is anticipated to be 465,000-540,000 tons. Zinc production is projected between 565,000 tons and 630,000 tons. Refined zinc output is estimated between 275,000 tons and 290,000 tons.

For second-quarter 2024, the company expects sales of zinc in concentrate of 50,000-60,000 tons at Red Dog. Steelmaking coal sales are projected to be 6.0-6.4 million tons for the quarter.

Update on Sale of Steelmaking Coal Unit

On Nov 13, 2023, Teck Resources announced that it has agreed to sell its entire stake in its steelmaking coal business, EVR, for an implied enterprise value of $9 billion. The majority of the sale (77%) will be made to Glencore plc GLNCY, 20% to Nippon Steel Corporation and 3% to POSCO PKX.Nippon Steel Corporation completed the acquisition of the 20% interest in EVR on Jan 3, 2024, with a payment of $1.3 billion in cash to Teck. On Jan 3, 2024, POSCO exchanged its 2.5% interest in Elkview Operations and 20% stake in the Greenhills joint venture for a 3% interest in EVR. The sale to Glencore is expected to close by the third quarter of 2024. Until the deal is closed, Teck will continue to operate the steelmaking coal business and will retain all cash flows.Proceeds will be used to strengthen TECK’s balance sheet while returning cash to shareholders. It will help the company focus on growing its extensive copper portfolio and thereby capitalize on the energy transition trend.

Price Performance

The company’s shares have gained 8.4% in the past year compared with the industry’s 8.9% growth.

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Zacks Rank & Stock to Consider

Teck Resources currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the basic materials space is Avient AVNT, which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The Zacks Consensus Estimate for Avient’s current fiscal year earnings is pegged at $2.55 per share, indicating year-over-year growth of 8%. AVNT beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, the average earnings surprise being 7.1%. The company’s shares have gained around 15% in the past year.

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Teck Resources Limited (TSE:TECK.B) just released its latest quarterly report and things are not looking great. Results showed a clear earnings miss, with CA$4.0b revenue coming in 6.5% lower than what the analystsexpected. Statutory earnings per share (EPS) of CA$0.65 missed the mark badly, arriving some 26% below what was expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for Teck Resources

earnings-and-revenue-growth

Taking into account the latest results, the consensus forecast from Teck Resources' ten analysts is for revenues of CA$15.8b in 2024. This reflects a satisfactory 4.0% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to bounce 60% to CA$4.97. Before this earnings report, the analysts had been forecasting revenues of CA$16.9b and earnings per share (EPS) of CA$5.21 in 2024. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.

The analysts made no major changes to their price target of CA$68.17, suggesting the downgrades are not expected to have a long-term impact on Teck Resources' valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Teck Resources at CA$88.00 per share, while the most bearish prices it at CA$45.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Teck Resources' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 5.4% growth on an annualised basis. This is compared to a historical growth rate of 8.9% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 14% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Teck Resources.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at CA$68.17, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Teck Resources going out to 2026, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 2 warning signs for Teck Resources (1 makes us a bit uncomfortable!) that you should be aware of.

BHP will have to sweeten its offer for Anglo American if it wants to succeed in its takeover of the diversified international miner with stakes in three big South American copper mines.

Freeport-McMoRan Inc. (NYSE:FCX) defied analyst predictions to release its first-quarter results, which were ahead of market expectations. Freeport-McMoRan delivered a significant beat with revenue hitting US$6.3b and statutory EPS reaching US$0.32, both beating estimates by more than 10%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Freeport-McMoRan

earnings-and-revenue-growth

After the latest results, the 15 analysts covering Freeport-McMoRan are now predicting revenues of US$25.1b in 2024. If met, this would reflect an okay 5.3% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to surge 37% to US$1.58. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$24.3b and earnings per share (EPS) of US$1.63 in 2024. Overall it looks as though the analysts were a bit mixed on the latest results. Although there was a an okay to revenue, the consensus also made a minor downgrade to its earnings per share forecasts.

There's been no major changes to the price target of US$50.87, suggesting that the impact of higher forecast revenue and lower earnings won't result in a meaningful change to the business' valuation. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Freeport-McMoRan, with the most bullish analyst valuing it at US$60.00 and the most bearish at US$39.20 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Freeport-McMoRan shareholders.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Freeport-McMoRan's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 7.2% growth on an annualised basis. This is compared to a historical growth rate of 12% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.8% per year. So it's pretty clear that, while Freeport-McMoRan's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, they also upgraded their revenue estimates, and are forecasting them to grow faster than the wider industry. The consensus price target held steady at US$50.87, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates – from multiple Freeport-McMoRan analysts – going out to 2026, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 1 warning sign for Freeport-McMoRan you should be aware of.

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