Sunnov Investment: BHP Drops Renewed Anglo Bid

Anglo American's proposed merger with Teck Resources, BHP Group's decision to abandon renewed takeover talks and accelerating copper demand together focus attention on how investors price critical metals exposure under tighter capital discipline.

As BHP Group confirms that it is stepping back from renewed talks with Anglo American, analysis from Sunnov Investment Pte. Ltd. considers how the decision reshapes prospects for the London listed miner's planned copper focused combination with Teck Resources and for investors tracking how critical minerals support the next phase of the energy transition.

Shares in Anglo American trade 2% higher in London dealing, extending gains of 16% over the past 12 months as investors reassess the likelihood that the Teck Resources tie up proceeds on agreed terms rather than being disrupted by BHP. The latest approach is BHP's second unsuccessful attempt within the preceding 18 months to secure the target company's copper assets, leaving the agreed all share merger between the two miners, valued at $53 billion on recent prices, back at centre stage.

The current rejection by the company's board follows an earlier proposal worth the equivalent of $54.9 billion in USD. Directors highlighted structural complexity, including potential disposal of South African interests, and indicated that the offer does not improve risk adjusted returns enough over the medium term. UK takeover rules now restrict BHP from bringing a new proposal for at least six months from the latest announcement, reinforcing its public emphasis on organic growth.

That emphasis includes capital and exploration expenditure of $10.5 billion for each of the next two financial years, with approximately 70% directed towards copper and potash projects over the same period. Major components of this plan include an estimated $2 billion commitment to the Vicuña joint venture in Argentina and staged development of the Jansen potash project in Canada, which is targeting initial production around the middle of the decade.

For the merger partners, attention centres on completing their transaction. The deal would create one of the largest dedicated copper producers, with pro forma annual output of around 1.35 million tonnes based on the latest reported production from both businesses. Under the agreed terms the London based group intends to issue 1.3301 new shares for every Teck share, and on recent market data the combined company carries an implied equity value above $54 billion, placing it among the biggest copper related deals in global mining.

Shareholders in both companies prepare to vote at special meetings scheduled for 9 December, while regulators continue to review the combination. Temagami Mining Company Limited, SMM Resources Incorporated and Dr Norman B. Keevil together control 79.8% of Teck's Class A common shares, according to the latest proxy materials, giving the transaction firm backing. Authorities in Canada, China, the United States and other markets are assessing the deal, with completion guided by a regulatory window of around 12 to 18 months.

Copper's role in decarbonisation provides the backdrop. Industry projections anticipate that demand rises by 24% to nearly 43 million tonnes a year by 2035 compared with present consumption, driven by investment in renewable power, grid upgrades and data centres. On current assumptions, each electric vehicle produced during this decade typically incorporates around four times as much copper as a comparable conventional car, and modern wind and solar installations require materially more copper per megawatt than fossil fuel generation.

Supply expectations are tighter, with analysts highlighting a potential shortfall of as much as 6.5 million tonnes by 2031 relative to projected demand if new mines and expansions are not approved and financed. That prospective gap is encouraging larger groups to compete more actively for high quality resources in established jurisdictions, helping to explain broker estimates that place the value of the group's copper footprint at least $36 billion based on existing production and sanctioned expansions.

For Sunnov Investment, the evolving situation is a demonstration of how quickly valuations can adjust when different strategic paths intersect. Thomas Gardner, Director of Private Equity, observes that "BHP stepping back narrows the range of outcomes that equity investors must price and places a sharper spotlight on whether the Anglo American-Teck Resources structure can deliver reliable copper volumes and attractive cash generation through the cycle."

Gardner adds that "the current phase of consolidation is less about headline size and more about proving that portfolios are resilient enough to support the electrification of transport, power and data infrastructure while meeting tougher regulation." He notes that "investors now look beyond deal headlines to test how management teams handle project execution risk, community relationships and exposure to shifting tax and royalty regimes across the life of an asset, and those judgements are shaping how capital is allocated to mining."

About Sunnov Investment

Sunnov Investment is a Singapore based investment manager serving accredited investors, foundations and endowments globally through long only equity portfolios and complementary long/short equity, global macro, event driven and systematic strategies. Established in 2012, the firm also develops structured avenues for eligible retail investors where regulations allow.

Website: https://sunnov.com

Media enquiries: Deng Hui, d.hui@sunnov.com
Registered business name: Sunnov Investment Pte. Ltd., UEN 201225494E.

This release was published on openPR.