BHP, world’s top miner, nears biggest acquisition in a decade

BHP, world's top miner, nears biggest acquisition in a decade

BHP Group Ltd. raised its offer for OZ Minerals Ltd. to value the Australian miner at $6.34 billion, as it seeks to produce more copper and nickel needed for electric vehicles, wind turbines and solar farms.

OZ Minerals said it intends to recommend shareholders vote in favor of BHP’s revised offer of 28.25 Australian dollars, the equivalent of about $18.90, a share. A completed deal would represent BHP’s largest acquisition since 2011 when it bought Petrohawk Energy Corp. for more than $12 billion.

BHP, based in Melbourne, Australia, approached Adelaide-based OZ Minerals about a potential takeover in August, but its offer was quickly rejected by directors as too low.

An employee monitors the 8mm diameter copper cable which is rolled up before passing through a rolling mill to become cable at the Nexans manufacture in Lens, northern France, on May 11, 2022. (Photo by Denis Charlet / AFP) (Photo by DENIS CHARLET /AF ((Photo by Denis Charlet / AFP) (Photo by DENIS CHARLET/AFP via Getty Images) / Getty Images)

On Friday, OZ Minerals said it had received a new proposal from BHP to buy the company. The latest offer represents an improvement on BHP’s initial proposal of 25 Australian dollars a share. OZ Minerals’s shares closed at 26.30 Australian dollars on Tuesday, the last session before trading in the stock was halted pending news of the transaction.

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BHP predicts that demand for copper, which is an excellent conductor of electricity and has wide-ranging uses including in construction and electronics, will double in the next three decades. OZ Minerals runs two copper-and-gold mining operations in South Australia, and another in Brazil.

Electric vehicles use four times as much copper as gasoline-powered cars, says BHP, while wind- and solar-energy production requires more copper, per megawatt hour, than producing electricity from fossil fuels.

electric car charging

Tesla cars charge at a Supercharger station on Culver Ave. in Irvine, CA on Friday, January 28, 2022. Electric vehicles use four times as much copper as gasoline-powered cars, while wind- and solar-energy production require more copper, per megawatt ((Photo by Paul Bersebach/MediaNews Group/Orange County Register via Getty Images) / Getty Images)

Yet the global outlook for copper production is hampered by the declining quality of deposits, water scarcity and a lack of exploration success, it says.

BHP also wants to produce more nickel, which OZ Minerals has in a project it is developing in Western Australia, where BHP already runs nickel mines and processing facilities. The mining giant last year agreed to a nickel-supply deal with Tesla Inc.

“Where we are really putting our growth emphasis is in potash, copper and nickel,” BHP Chief Executive Mike Henry told a conference last month.

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TSLA TESLA INC. 180.19 -2.98 -1.63%

BHP said the offer is its best and final price, unless a rival bidder emerges.

Global miners including BHP have been cautious about acquisitions in recent years after megadeals during a commodities boom a decade ago led to large write-downs, frustrating shareholders. BHP last year sought to buy Canadian nickel explorer Noront Resources, but lost a bidding war to Wyloo Metals, owned by Australian billionaire Andrew Forrest.

rare earth mine

A view of the MP Materials rare earth open-pit mine in Mountain Pass, California, US January 30, 2020. Picture taken January 30, 2020. REUTERS/Steve Marcus/File Photo (REUTERS/Steve Marcus/File Photo/Reuters Photos)

“OZ is a nice-to-have,” Mr. Henry said at the conference last month. “It is not a must-have for BHP.”

BHP currently relies on iron ore, the main ingredient in steel, for the bulk of its earnings. It is also the world’s biggest exporter of steelmaking coal in a joint venture with Japan’s Mitsubishi Corp. BHP recently bet on the transition to a lower-carbon world by selling its oil-and-gas unit and approving a $5.7 billion project to mine potash in Canada.

Ticker Security Last Exchange Change %
MSBHF MITSUBISHI CORP. 30.7 +0.31 +1.02%
BHP BHP GROUP LTD. 58.74 +0.14 +0.24%
OZMLF OZ MINERALS 18.12 -0.43 -2.32%

OZ Minerals was trading as low as 16 Australian dollars a share in the weeks before BHP’s initial approach, as recession concerns weighed on copper prices. Yet, it had traded at nearly 30 Australian dollars earlier in the year, when copper prices surged to an all-time high on fears of scarce supplies.

BHP has been granted four weeks to conduct due diligence exclusively, starting Monday.

OZ Minerals Chief Executive Andrew Cole said the revised price better reflected the company’s potential in producing metals that the world needs more of as the energy transition gathers pace.

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Some analysts say OZ Minerals is a good fit for BHP, which runs the large Olympic Dam copper mine in South Australia. BHP is also working on another nearby prospect, known as Oak Dam. In August, OZ Minerals said BHP had accumulated an interest of less than 5% in the company.

Some of OZ Minerals’s assets are small when measured against BHP’s existing operations, although they could be developed into bigger or longer-life operations, analysts say. BHP counts a majority stake in Chile’s Escondida, the world’s biggest copper mine, among its assets.

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