BHP, Anglo American merger could reshape global mining: Economists

Anglo American mine Thabazimbi
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Some economists have described a merger proposal between Anglo American and the world’s largest mining house, the BHP Group, as a potential mega deal that could reshape the global mining industry.

BHP, which has its headquarters in Melbourne, is said to be doubling down on its big bet on copper demand growing exponentially in the global shift away from fossil fuels to electric vehicles and battery technology.

Anglo American is a 107-year-old major copper, diamond and platinum producer listed on global markets, including the Johannesburg Stock Exchange.

Economist Gary Booysen explains what the unsolicited conditional merger proposal entails: “As part of the deal, they are expecting Anglo to unbundle Amplats (Anglo American Platinum) as well as Kumba (Iron Ore) – they are after the underlying copper assets key to the electric future. We are looking at EV (electronic vehicle) production and a move towards cleaner energy; copper becomes a very important asset.”

“To complete such a deal will take time but at the moment (it’s) a very exciting deal on a massive transaction; probably the biggest mining transaction since Glencore bought Xstrata back in 2013.”

Absa analyst Simphiwe Letlojane says, “It is quite a major one, when you look at the underlying business BHP and Anglo American in terms of their overall commodity exposure there is quite a lot of overlaps there but the key one being the copper business because they say they are looking to essentially acquire the business but upon acquiring the business they are looking to unbundle the platinum asset as well as the iron ore assets in SA.”

Mining analyst Peter Major has raised concern about the regulatory environment, uncertain investment and economic climate in South Africa which he says may have been behind the conditions attached to the potential acquisition

“Anglo has so many important holdings in South Africa and out of South Africa. Unfortunately, no international company wants to have investments in South Africa, it’s too hard to get a competitive rate of return, it’s too much pity, unknowing too much unpredictability so that’s a real on mine in the sand right there. BHP loves the assets that Anglos has it would probably keep some of them if they weren’t in South Africa, without a doubt, it doesn’t want to get involved in complicated underground mines.”

VIDEO| More details of the proposed deal in the report below: