Despite the “gee whiz” headlines here and overseas about BHP’s move to buy UK-based Anglo American, the deal will only happen if the company successfully navigates an obstacle course of government approvals around the world.
BHP is offering US$39 billion (A$60 billion) in an all-share deal for the century-old, British-listed miner. Shareholders will get a say of course, but it will also require approvals and at least non-opposition from, inter alia, South Africa, Chile and China. And China’s attitude will be crucial.
It’s hard to see Beijing liking the world’s third-biggest iron ore group taking out the sixth-biggest iron ore group — those with long memories might recall China opposing BHP and Rio Tinto’s brief merger idea 16 years ago that was killed off by the financial crisis. Given China’s commitment to dominating the EV battery space, it also won’t be too happy about the world’s biggest copper miner becoming significantly larger and more powerful via Anglo-American’s copper interests (copper is a major component of batteries and China’s imports of the metal have more than doubled in the past decade).
Nor will the Chilean government fancy BHP not only controlling Escondida — the world’s biggest copper mine by capacity — but also picking up 44% of Anglo’s Collahuasi copper mine, which is the world’s third-biggest. Peru probably won’t appreciate BHP controlling a major mine of its own and Anglo’s big mine in that country either.
Then there’s South Africa, where it gets messy. Anglo began in South Africa during World War I and still has significant assets there. BHP doesn’t like having assets in South Africa — the thermal coal, aluminium and manganese assets it acquired from the Billiton takeover in 2001 left a lasting scar on its accounts. BHP wants Anglo to agree to spin off its controlling stakes in Anglo’s platinum and iron ore companies in South Africa. In contrast, BHP wants to keep Anglo’s Brazilian iron ore mine and export operations. The political environment in South Africa, including looming elections, regular corruption scandals and continuing talk of nationalisation, won’t do anything to change BHP’s mind.
But BHP didn’t say anything about Anglo considering selling its 85% stake in the De Beers diamond business. The government of Botswana — where the main mines are now found — owns 15%. Apart from De Beers, the copper mines and the iron ore operations in Brazil, BHP wants Anglo’s potash operation in England (Yorkshire) and five coking coal mines in Queensland (which are Whitehaven Coal, BHP’s 50%-owned coking coal joint venture with Mitsubishi of Japan).
Anglo has struggled with copper production issues: it reported production of 826,000 tonnes last year, lower than a previously forecast range of 830,000-870,000 tons. The company left its 2024 copper output guidance at 730,000-790,000 tons. Fixing those problems will be a priority for BHP and would boost its global copper output to close to 2.5 million tonnes a year, or around 10% of annual world output — by far the largest producer in the world.
A successful bid would probably be bad news for BHP’s immediate ambitions to make South Australia into a major copper, gold, uranium and silver mining business at Olympic Dam and the nearby prospect called Oak Dam, along with the two mines (and a development project) picked up in last year’s $9.6 billion purchase of OZ Minerals. BHP is already making a substantial investment in those operations, but its focus may shift to ensuring its Anglo assets are producing to capacity first — and that will have ramifications both with the South Australian government, which has been a big supporter of BHP, and federally.
Finally, BHP doesn’t quite think this is a big enough deal to include cash in the first set of terms, or offer all cash — it could easily do so, being worth $220 billion. It had US$10.3 billion in cash at December 31 and around US$19.5 billion in debt. But that means it has plenty of room on its balance sheet to add a sweetener to make the deal successful. Watch for a final offer including a large dollop of cash — possibly a third of the price.
But success will hinge not on the price but on regulators and governments around the world — in Australia, the EU, UK, the US, Peru, Botswana, Japan, Taiwan and Brazil, along with those mentioned above. In the world of renewable energy, everyone is now interested in copper and who controls it.
