BHP is seeking to increase its exposure to copper, a key energy transition metal, through a proposed $38.8 billion takeover of Anglo American. The deal, if realised, would see BHP emerge as the world’s biggest copper producer, accounting for around 10% of global mined supply.

“The proposed merger is to gain access to Anglo American’s strategic resources, copper in particular,” said Yongcheng Zhao, principal copper analyst at Benchmark. “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.”

The proposed acquisition, the largest in the commodity sector’s recent history, marks the latest chapter in BHP’s plans to increase its exposure to “future-facing commodities” through an expansion of its copper footprint. Last year the mining giant acquired Australian copper producer Oz Minerals for $6.4 billion.

Anglo American is home to prized copper assets in Peru and Chile, but has found itself at a crossroads following significant downgrades to its production forecasts in 2024-25. Despite a bullish outlook for the red metal, the London-based mining company was forced to lower its 2024 copper forecast by 7% due to curtailments at its Chilean operations.

Copper prices have surged in response to heightened demand and expectations that close to 1Mt of mine supply disruptions are set to be realised over the course of 2024, with the market also pricing in additional mine supply risk this year and next.

BHP produced approximately 1.3Mt of copper in 2023, while Anglo American’s output stood at 0.57Mt. However, concerns over potential antitrust issues could be a sticking point in the proposed takeover, given the significant market dominance that would result from the combined forces of BHP and Anglo American presence in the copper sector.

Acquisitions underscore supply growth limitations

Copper is underpinning global decarbonisation efforts, with vast quantities required to build the infrastructure necessary to support the green energy transition. Exponential demand growth from clean energy technologies will also be supplemented by traditional end-use sectors, such as construction.

However, a lack of new mined copper resources has the potential to slow the energy transition and de-rail global climate targets.

“The proposed deal highlights miners’ desperation to boost production through acquisitions, rather than through organic growth, in order to reap the benefits of the growing supply gap,” said Piotr Ortonowski, project manager at Benchmark. “However, this solution does little to bridge the supply gap itself.”

Miners’ seek copper acquisitions to support growth:

BHP has warned that there will be insufficient copper supply to electrify the global economy, with CEO Mike Henry last year suggesting there is an investment shortfall of more than $300 billion to develop new supply.

In announcing the launch of Benchmark’s coverage of copper, Benchmark analysts recently noted that recent mine disruptions have effectively fast-tracked the markets transition to a deficit by eradicating the previously forecasted two- to three-year surplus buffer.

More than copper

Aside from copper, the proposed deal would also see BHP acquire Anglo American’s coking coal, iron ore and nickel assets, cementing its position as the world’s largest mining company.

According tothe Benchmark Nickel Forecast, Anglo American produced more than 60kt of refined nickel across its operations in Brazil and South Africa in 2023. Combined output from BHP’s nickel operation’s in Western Australia and Anglo American could reach close to 150kt, making it one of the largest producers of nickel outside of Indonesia.

BHP has previously outlined ambitions to increase its exposure to nickel, which it deems a “future facing commodity” critical to the energy transition. As part of last year’s acquisition of Oz Minerals, the mining giant acquired the West Musgrave nickel mine in Western Australia.

However, both companies have been forced to realise substantial impairment charges on their nickel assets in 2024, as double digit declines in nickel prices since early 2023 have created challenging market conditions. Western nickel miners have come under pressure from a glut of low-cost nickel supply coming onstream from Indonesia.

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