Anglo shares jumped 13% in London on Thursday morning to £24.91 apiece, for a market value of £30.5 billion. BHP, which has a value of about $144 billion, fell 3.7%.

A tie-up with Anglo would give BHP roughly 10% of global copper mine supply ahead of an expected supply shortage that many market watchers have predicted will send prices soaring. If successful, the transaction would mark a return to large-scale dealmaking for BHP, while potentially flushing out other suitors also aiming to boost their exposure to the metal that is closely linked to the global energy transition.

Anglo American has long been viewed as a potential target among the largest miners, particularly because it owns attractive South American copper operations at a time when most of the industry is eager to add reserves and production. However, suitors have been put off by its complicated structure and mix of other commodities from platinum to diamonds, and especially its deep exposure to South Africa.

Anglo has faced a series of major setbacks over the past year as prices for some of its key products plunged, while operational difficulties have forced the company to slash its production targets — driving down its valuation and leaving the company vulnerable to potential bidders.

The company said in a statement late Wednesday that its board was reviewing the proposal, which it confirmed after Bloomberg first reported BHP’s interest.

Big deals

A successful takeover would represent the first mega deal among the world’s biggest diversified miners in over a decade. BHP and its biggest rivals spent years on the sidelines after a series of disastrous transactions, but there has been a growing expectation that the industry is heading for a wave of M&A as companies are flush with cash and management teams have worked hard to reassure investors that they have learned from past mistakes.

“If BHP does indeed continue to pursue this deal, we would be surprised if other bidders do not emerge,” analysts from Jefferies LLC led by Christopher LaFemina said in an emailed note. A bid that values Anglo at $42.6 billion — a 28% premium based on its latest share price — might get a deal “across the finish line,” they said.

BHP last year bought copper producer OZ Minerals Ltd. for about $6.4 billion in its first major purchase in years, but has otherwise focused until now on selling assets such as oil, gas and coal.

The clear lure here would be Anglo’s South American copper business, long eyed by bigger players in the industry — even though it has recently faced setbacks and has had to reduce its copper production forecasts.

BHP produced about 1.2 million tons of copper in 2023 on an equity basis, while Anglo’s output was 826,000 tons. That would give the combined group roughly a 10% share of global mine supply. Jefferies said antitrust issues “would likely be a problem” for the deal since governments consider copper a strategic mineral.

It’s also possible that the proposal for Anglo could now prompt others to make a move. No. 2 miner Rio Tinto Group has also been investing in copper production, while Glencore Plc last year made an unsuccessful offer for Teck Resources Ltd., which has a coveted copper business, before eventually reaching a deal for the Canadian company’s coal assets.

Anglo’s valuation may make it more attractive, but it remains a highly complicated business. The company owns majority stakes in two South African-listed miners — Anglo American Platinum Ltd. and Kumba Iron ore Ltd. — and is the majority owner of diamond miner De Beers. It also has a long and complicated relationship with South Africa, where the state pension fund manager is its biggest shareholder.

BHP’s proposal was to first hand Anglo’s stakes in the two South African businesses to the smaller company’s investors before proceeding with a takeover, Anglo said. The two parts of the proposal would be “interconditional,” it said.

Anglo’s other operations include copper, nickel, steelmaking coal and Brazilian iron ore, as well as the iconic De Beers business.

Both companies are also investing in new fertilizer businesses — BHP is building a massive potash mine in Canada, while Anglo is developing a polyhalite mine on the east coast of England.

(By Dinesh Nair, Thomas Biesheuvel and Crystal Tse)