Glencore (LON:GLEN) Eyes an Anglo American (LON:AAL) Takeover Bid, Sparking Potential Bidding War

Source: Anglo American

In a recent interview, Hudbay Minerals CEO Peter Kukielski stated that he believes that BHP Group’s recently rejected $39 billion offer for Anglo American has increased the value of copper assets. This could signal a growing willingness among large miners to pay a premium for existing copper mines, and spark a potential bidding war.

Hudbay plans to initiate a formal sale process later this year for a minority stake in its Arizona Copper World project. The company has already engaged in preliminary discussions with interested parties.

Copper Demand and Prices

BHP’s offer for Anglo American, though ultimately rejected, highlights the industry’s focus on copper. Three-month copper prices on the London Metal Exchange recently peaked above $10,200 a metric ton, driven by expected demand for the metal in electrification technologies.

Hudbay’s Copper World project is currently under construction and projected to produce an average of 92,000 metric tons of copper annually over its first ten years. Phase 1 development has an estimated cost of C$1.3 billion ($950.6 million). Kukielski indicated that Hudbay will look for joint-venture partners once necessary permits have been obtained.

Canadian Miners as Targets

Analysts see Canadian copper miners as potential acquisition targets due to a global shortage of new copper mines. Hudbay itself has been active in domestic acquisitions, purchasing Copper Mountain last year for C$439 million. However, RBC Capital Markets has also suggested Hudbay could become a takeover target if copper prices decline.

BHP Group Ltd.’s proposed £31.1 billion ($38.8 billion) takeover of Anglo American aimed to create a mining giant with significantly increased copper production. The all-share deal would have required Anglo to first spin off its controlling interests in South African platinum and iron ore companies. Anglo American rejected the offer, deeming it an undervaluation.

A BHP-Anglo combination would have given BHP roughly 10% of the world’s copper mine supply. Market watchers anticipate a significant copper supply shortage, which is expected to drive prices higher. This deal, while unsuccessful, could spark interest from other major miners looking to increase their copper exposure.

Anglo American, with attractive South American copper operations, has been a long-considered takeover target. However, its complex structure involving commodities like platinum and diamonds, along with its significant South African holdings, has deterred potential suitors.

Anglo American has recently faced setbacks due to price drops in some of its key commodities and operational challenges. These factors have contributed to a decline in its valuation, potentially increasing its vulnerability to takeovers.

The BHP-Anglo proposal, despite its rejection, suggests a return to mega-deals in the mining sector after a decade of cautious activity. With larger cash reserves and a renewed focus on investor confidence, the industry appears ready for a potential wave of mergers and acquisitions.

Commodities giant Glencore is also reportedly considering an approach to acquire Anglo American, according to two sources familiar with the matter. This development suggests a potential bidding war could emerge for the 107-year-old mining company.

Discussions within Glencore are in preliminary stages, and it remains uncertain whether the company will formally approach Anglo with an offer. However, Glencore’s interest comes on the heels of BHP Group’s recently rejected $39 billion all-stock takeover proposal.

BHP May Still Be in the Running

A source familiar with BHP’s plans previously indicated that the Australian mining giant is exploring an improved offer for Anglo American. BHP has until May 22nd to make a formal bid, suggesting the company may remain in contention.

Anglo American’s appeal lies primarily in its prized Chilean and Peruvian copper assets. Demand for copper is projected to surge due to its widespread applications in electric vehicles, renewable energy infrastructure, and expanding AI technologies.

Anglo American and Glencore currently hold equal 44% stakes in Chile’s Collahuasi mine, which boasts some of the world’s largest copper reserves. Anglo’s diverse portfolio also includes platinum, iron ore, diamonds, steelmaking coal, and a fertilizer project, adding to its attractiveness.

Since BHP’s offer became public, Anglo American’s share price has climbed over 30%. The company had previously underperformed its mining peers after experiencing production downgrades and asset writedowns earlier this year.

Glencore’s Concurrent Acquisition, and the South Africa Factor

Glencore’s potential interest in Anglo comes as it finalizes a $6.9 billion acquisition of a 77% stake in Teck’s Canadian coal unit. The deal is anticipated to close by the third quarter of this year.

Anglo’s significant holdings in South Africa, including shares in Anglo Platinum (Amplats) and Kumba Iron Ore, could raise strategic considerations for potential buyers. BHP exited South Africa in 2015, but Glencore maintains coal and chrome operations in the country.

 

 

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.
Matthew Evanoff

I specialize in the mining industry, focusing on top global mining stocks. My reporting covers the latest industry news, company/project developments, and profiles of key players. With a degree in finance and economics from the University of Toronto, I've contributed to a wide range of industry publications. Beyond my professional pursuits, I have a keen interest in global business and a love for travel.

By Matthew Evanoff

I specialize in the mining industry, focusing on top global mining stocks. My reporting covers the latest industry news, company/project developments, and profiles of key players. With a degree in finance and economics from the University of Toronto, I've contributed to a wide range of industry publications. Beyond my professional pursuits, I have a keen interest in global business and a love for travel.

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