Wayne Gibbons’ Post

There’s some interesting M&A drama unfolding in the world of mining. BHP wants to buy Anglo American. But Anglo isn’t having it. On April 16, BHP offered to buy Anglo for $39 billion. Anglo’s board promptly rejected that offer. Then on May 7, BHP made a revised offer of $43 billion, which The WSJ said “would be the biggest mining deal on record.” Anglo’s board? “The Board has considered the Latest Proposal with its advisers and concluded that it continues to significantly undervalue Anglo American and its future prospects.” There’s a bunch going on with this one. BHP has many interests here, but a big one is adding to its inventory of copper assets. I wrote about all of this in my newsletter that went out on Sunday, May 5. Interestingly, copper prices are booming right now. MarketWatch noted “Copper futures climbed to their highest settlement in over two years on Monday, but after a roughly 28% rise over the past three months, some analysts warned that the industrial metal has reached overbought territory.” That’s an incredible run. And no wonder Anglo’s board isn’t excited about accepting what they believe is a less than premium offer. Anglo’s in an interesting financial position. They generated $30.7 billion in revenue in 2023, but only $1.3 billion in net profit, for a 4% net margin. But in 2022, revenue was $35.1 billion with a $6.0 billion net profit, for a 17% net margin. It’s a natural resource extraction company, which means its fortunes can swing wildly with commodity prices. That makes it really difficult to value as an enterprise, which of course helps explain why BHP and the Anglo board seem to be so far off in their assessments. Add in the fact that copper prices are absolutely ripping right now, and this kind of M&A skirmish is hardly a surprise. 𝘗.𝘚. 𝘐𝘧 𝘺𝘰𝘶 𝘩𝘢𝘷𝘦𝘯’𝘵 𝘴𝘪𝘨𝘯𝘦𝘥 𝘶𝘱 𝘧𝘰𝘳 𝘮𝘺 𝘧𝘳𝘦𝘦 𝘸𝘦𝘦𝘬𝘭𝘺 𝘯𝘦𝘸𝘴𝘭𝘦𝘵𝘵𝘦𝘳, 𝘛𝘩𝘦 𝘉𝘶𝘴𝘪𝘯𝘦𝘴𝘴 𝘰𝘧 𝘌𝘯𝘦𝘳𝘨𝘺, 𝘩𝘪𝘵 𝘵𝘩𝘦 𝘭𝘪𝘯𝘬 𝘪𝘯 𝘮𝘺 𝘱𝘳𝘰𝘧𝘪𝘭𝘦. 𝘈𝘵 𝘵𝘩𝘦 𝘦𝘯𝘥 𝘰𝘧 𝘦𝘢𝘤𝘩 𝘯𝘦𝘸𝘴𝘭𝘦𝘵𝘵𝘦𝘳 𝘐 𝘪𝘯𝘤𝘭𝘶𝘥𝘦 𝘢𝘯 𝘦𝘯𝘦𝘳𝘨𝘺-𝘳𝘦𝘭𝘢𝘵𝘦𝘥 𝘢𝘯𝘦𝘤𝘥𝘰𝘵𝘦, 𝘪𝘯𝘴𝘪𝘨𝘩𝘵 𝘰𝘳 𝘰𝘣𝘴𝘦𝘳𝘷𝘢𝘵𝘪𝘰𝘯 𝘵𝘩𝘢𝘵 𝘐 𝘥𝘰𝘯’𝘵 𝘴𝘩𝘢𝘳𝘦 𝘢𝘯𝘺𝘸𝘩𝘦𝘳𝘦 𝘦𝘭𝘴𝘦. 𝘐𝘵 𝘸𝘢𝘴 𝘪𝘯 𝘵𝘩𝘢𝘵 𝘴𝘦𝘤𝘵𝘪𝘰𝘯 𝘵𝘩𝘢𝘵 𝘐 𝘸𝘳𝘰𝘵𝘦 𝘢𝘣𝘰𝘶𝘵 𝘉𝘏𝘗’𝘴 𝘰𝘳𝘪𝘨𝘪𝘯𝘢𝘭 𝘣𝘪𝘥 𝘧𝘰𝘳 𝘈𝘯𝘨𝘭𝘰 𝘈𝘮𝘦𝘳𝘪𝘤𝘢𝘯, 𝘪𝘯𝘤𝘭𝘶𝘥𝘪𝘯𝘨 𝘴𝘰𝘮𝘦 𝘯𝘰𝘵𝘦𝘴 𝘢𝘳𝘰𝘶𝘯𝘥 𝘵𝘩𝘦𝘪𝘳 𝘳𝘦𝘴𝘱𝘦𝘤𝘵𝘪𝘷𝘦 𝘤𝘰𝘱𝘱𝘦𝘳 𝘱𝘳𝘰𝘥𝘶𝘤𝘵𝘪𝘰𝘯 𝘭𝘦𝘷𝘦𝘭𝘴. 𝘐 𝘤𝘰𝘷𝘦𝘳 𝘢 𝘥𝘪𝘧𝘧𝘦𝘳𝘦𝘯𝘵 𝘢𝘳𝘦𝘢 𝘦𝘷𝘦𝘳𝘺 𝘸𝘦𝘦𝘬. 𝘚𝘪𝘨𝘯 𝘶𝘱 𝘪𝘧 𝘵𝘩𝘢𝘵 𝘬𝘪𝘯𝘥 𝘰𝘧 𝘥𝘪𝘴𝘤𝘶𝘴𝘴𝘪𝘰𝘯 𝘢𝘱𝘱𝘦𝘢𝘭𝘴 𝘵𝘰 𝘺𝘰𝘶. https://lnkd.in/gvtNp2JN

Big news in the mining world with the proposed take over of Anglo American by BHP. The size of the story is only dwarfed by the sums of money being quoted - £31bn! What will be the effect on the workforce? What will be the effect on the economies where the companies operate? Anglo are huge employers in South Africa and an South America. I can only imagine the amount of work being done by the People teams in these businesses. As a People professional would you see this deal as an opportunity to create impact or an opportunity to move on? https://lnkd.in/edw7GRbw

RIO TINTO CHAIR WARNS MINING DEALS WON'T SOLVE SUPPLY CRISIS The world needs more mines to cope with rising demand for key energy-transition metals like copper, as mergers and acquisitions will not plug a looming supply gap, Rio Tinto Group chairman Dominic Barton said. “As an industry, we’re not going to inorganic our way out of this challenge,” Barton said in a Bloomberg TV interview, referring to growth through deals. “It’s huge, and it’s in at least five different commodity areas.” Global mining M&A has ramped up over recent months, as healthy cash flows and the outlook for key green energy metals encourage the rapid addition of extra production. BHP Group has been among the most active, swooping on Filo after the world’s biggest miner’s $49-billion bid for Anglo American was rebuffed. Rio, however, has been quiet in the dealmaking space, instead allocating hundreds of millions into exploration with a focus on copper and lithium. Still, Barton said the company was “looking at opportunities”. “We’re just going to have to build more,” he said. “We’re going to need to mine, discover, and mine more copper in the next 30 years.” https://lnkd.in/dEmhbwQV #miningrecruitment #cowaninternational #gateway4opportunity

Big changes on the mining industry🚀 The recent bid from bhp to acquire Anglo American, along with Elliott Management's stake in Anglo shares, has initiated speculation about the future of the 107-year-old mining company. Anglo still holds valuable assets, specially in copper and high-grade iron ore, crucial for the green-energy transition. This makes us realise the commitment that large companies are currently making to energy efficiency, which we have been seeking for years. On the operational landscape, inefficiencies and distractions have obstructed Anglo's performance compared to competitors like bhp and Rio Tinto. Delays in project permits and rising costs have impacted its copper and iron ore production, rising a unique opportunity for competitors such as Antofagasta and Barrick Gold to earn a bigger share in the market. Despite rejecting bhp's initial bid, Anglo's market capitalization has surged, indicating market anticipation of a higher offer. A potential acquisition of Anglo could reshape the industry landscape. Source: https://lnkd.in/dUKCq7QF

Rio Tinto announced the approval of the Simandou mining project in West Africa, set to become the world’s largest iron ore mine. Despite setbacks, Rio Tinto plans to commence production by 2025, investing $20 billion in collaboration with the Guinean government and Chinese partners. The project aims to boost global iron ore supply by 5% upon completion. Chile could advance its exploration, exploitation, and exportation of iron ore with improved port facilities, leveraging the country’s diverse mineral resources beyond copper as its primary focus. Upgrading port infrastructure would facilitate efficient transportation and exportation of iron ore, enhancing Chile’s position in the global minerals market.

With more outstanding results from the current drilling program at #IG6s Springdale Graphite Resource released this morning, Small Caps reports the latest results "continue to confirm the overall veracity of the mineral resource at Springdale". The ore, which will supply ore to International Graphite’s downstream processing facility at Collie, south of Perth, features the key determinants for a low-cost mine, all in a tier-one mining jurisdiction. “On top of all the positive attributes, the exploration potential for future mineral resource growth is clear to see,” says Managing Director and CEO Andrew Worland Stand out graphite intercepts include: - 11.1m @ 16.9% Total Graphitic Carbon (TGC) from 23.1m downhole (SGDD0021) - 13.4m @ 19.2% TGC from 35.3m downhole, including 2.9m @ 31.4% TGC from 38.8m downhole (SGDD0021) - 10.3m @ 36.3% TGC from 41.8m downhole (SGDD0022) - 3.8m @ 21.3% TGC from 17.2m downhole, including 3.1m @ 25.5% TGC from 17.9m downhole (SGDD0017) - 9.7m @ 6.2% TGC from 75.8m downhole (SGDD0017) - 28.7m @ 12.1% TGC from 93.0m downhole, including 4.1m @ 23.3% TGC from 112.0m downhole (SGDD0019) https://lnkd.in/gdY9VyQY

Rio Tinto approves world’s biggest mining project in west Africa Miner’s chief Jakob Stausholm outlines ambition to produce iron ore from $20bn development as soon as 2025 Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.comT&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. Rio Tinto’s board has approved the world’s biggest mining project in west Africa, chief executive Jakob Stausholm said as he outlined the company’s ambition to produce iron ore from the $20bn development as soon as 2025. London-listed Rio Tinto will invest $6.2bn in the mine, rail and port project in the Republic of Guinea, in a partnership with at least seven other companies, including five from China. More information can be found here. https://lnkd.in/dJBfjGfR

A few days ago, I posted about the two approaches to growing a large mining producer: home grown vs store bought (https://lnkd.in/grF-mqWj). That post discussed the Rio Tinto home grown approach. Well, this article highlights the opposite: the store bought approach adopted by fellow giant BHP. Mining giant BHP has confirmed it made a $60 billion proposal to rival Anglo American about buying the 107-year-old mining company, in what could rank as this year’s biggest deal. Not surprisingly the press has reported the copper assets are the focus, while non-core assets like diamonds will be carved out (not surprising given this article: https://lnkd.in/gbpWn6EA). One of the big strategic dilemmas for the "majors" (the largest mining companies) is homegrown vs store bought. Mining is a pipeline business – you produce product (copper, gold, lithium etc.) out the bottom and put new mining projects in the top. Of course it takes years for projects to transition from top to bottom, but eventually if you don’t put new resources in at the top, the bottom dries up. Companies that aren’t in the “major” category don’t always have the luxury of picking only one strategy and sticking to it, they usually have to wait for opportunistic additions, sometimes that evolve from homegrown, but others that are picked up when they are on sale. Majors tend to prefer one approach or another in NORMAL times. There are costs associated with either approach: 1. To start at the mining claims stage, you need to have an exploration and development team inhouse and look after all stages of growth, and risk, along the project lifecycle. On the plus side, you can develop projects for less cost. 2. Or you can pick up companies farther along the develop scale that you have identified as more aligned with your strategic interests and that are closer to production. In those cases, someone else has already taken the risk of getting a project to that stage. Of course, you pay a premium for that.

Huge news from the copper world with BHP bidding $39b takeover with Anglo American!! BHP Group Ltd. proposed a takeover of Anglo American Plc that values the smaller miner at £31.1 billion ($38.8 billion), in a deal that would catapult the combined company’s copper production far beyond its rivals while sparking the biggest shakeup in the industry in over a decade. The world’s biggest mining company has proposed an all-share deal in which Anglo would first spin off its controlling stakes in South African platinum and iron ore companies to shareholders before being acquired by BHP. The total per-share value of the non-binding proposal is about £25.08, BHP said, which is a 14% premium to Anglo’s closing share price on Wednesday. https://lnkd.in/ejbg67BH

YAKR WEEKLY BRIEFING Australian Mining’s biggest headlines of the week that was, dot-pointed and delivered every week to keep you in the loop. MARKET MOVEMENTS: - Fortescue Metals Group announced a 10% increase in iron ore shipments for the June quarter (Q4 FY24) compared to the same period last year. - Leo Lithium has signed a deal with Ganfeng Lithium to raise $72 million. The funds will be used to ramp up production at the Goulamina project in Mali and explore joint downstream conversion facilities in Europe or West Africa. - The Bellevue gold mine in Western Australia delivered an operational free cash flow of $41 million in the June quarter. The company also announced a strategic five-year growth plan and an equity-raising initiative to boost growth, reduce costs, and increase margins. INDUSTRY TRENDS: - A CSIRO report revealed that the demand for critical minerals essential for the energy transition has doubled over the past five years, now valued at $320 billion. Australia is positioned to enhance its refining industry to capitalise on this demand. - Ardea Resources has entered into a partnership with Japan’s Sumitomo Metal Mining and Mitsubishi to develop the Kalgoorlie nickel project. This joint venture is expected to make the project one of the largest nickel-cobalt producers in Australia once operational. CORPORATE DEVELOPMENTS: - StrataLock was named the Queensland Mining Contractor of the Year at the Queensland Mining and Engineering Exhibition (QME), recognising their exceptional performance and contribution to the industry. - Newmont Corporation reported robust earnings for Q2, with a production of 2.1 million gold equivalent ounces, reinforcing their position as a leading player in the gold mining sector. - Workers at CBH Rasp Mine expressed relief as the mine was sold to Broken Hill Mines Limited, securing jobs and operational continuity. ENVIRONMENTAL AND REGULATORY UPDATES: - The Australian government has blocked Rio Tinto-controlled Energy Resources of Australia from mining a vast uranium deposit under the Kakadu National Park in the Northern Territory, effectively ending a decades-long dispute over the resource. - The Tasmanian Government is pushing ahead with critical minerals exploration, aiming to bolster the state's economic and strategic capabilities.  A major funding milestone was achieved for rare earth projects in the Northern Territory, enhancing Australia's capacity to supply essential minerals for global markets. W: YAKR.COM.AU  E: HELLO@YAKR.COM.AU  P: 02 6190 9740