A Scramble for Copper Assets
Australian mining giant BHP Group's $40 billion bid for rival Anglo American may not be enough to secure the company. Other diversified miners are likely to make competing offers, driven by the global scramble for copper assets.
This move comes after BHP's $6.4 billion acquisition of Australian copper producer OZ Minerals last year. The company is doubling down on copper, anticipating a surge in demand as the world transitions from fossil fuels.
The increased demand for copper stems from the growing adoption of solar and wind farms and electric vehicles, which require more copper than traditional energy sources and vehicles.
"This is the latest move to consolidate in industrial metals driven by a scramble for copper and other metals central to the world’s clean energy movement," said Sean Casterline, founder of Delta Capital Management.
BHP, already the world's largest mining company, is currently the third-largest copper producer. A successful acquisition of Anglo American would propel BHP to the top position.
Analysts believe BHP's offer of $32.27 per share may not be enough to entice Anglo American. The company's shares have been undervalued due to operational issues and a slump in diamond and platinum markets.
Several analysts believe a higher offer, potentially exceeding $35 per share, would be necessary for serious discussions. They also anticipate other bidders, such as Glencore and Vale, to enter the fray.
The attractiveness of copper acquisitions lies in the time and expense associated with building new copper mines. This is particularly true in the U.S. and other jurisdictions with stringent permitting processes or environmental concerns.
"There is a scramble for assets," said Jason Crawshaw, portfolio manager at Polaris Capital. "Everybody is always looking to get more exposure to copper."
Even gold miners are showing interest in acquiring copper assets. Last year, Newmont Corp. acquired Newcrest Mining Ltd., adding significant copper reserves. Barrick Gold Corp. is also expanding its copper operations in Zambia.
Investors seeking exposure to copper producers can consider various ETFs, including the Global X Copper Miners ETF (COPX), Sprott Copper Miners ETF (COPP), Sprott Junior Copper Miners ETF (COPJ), and iShares Copper and Metals Mining ETF (ICOP).