Copper, photographed at BHP's Olympic Dam mine in South Australia, is a hot commodity that may get hotter as deposits become more difficult to find.Sonali Paul/Reuters
Mike Henry, the Canadian CEO of BHP BHPLF, the world’s biggest mining company, tried to go out with a bang. Instead, he will leave with a whimper. The art of the deal was not his forte, at least in the last year or so. And for that, Canada’s Teck Resources TECK-B-T couldn’t be happier.
Mr. Henry has been CEO of BHP since 2020 and is likely to retire some time in 2026. He will leave BHP in good shape, with leading positions in copper, steel-making coal, nickel, potash and iron ore. The one product he truly seemed to cherish was copper, the metal essential to creating the low-carbon, renewable-energy future. Copper prices have doubled since 2020 and the rally remains intact as demand outstrips supply and discoveries become scant.
Enter Anglo American NGLOY, the London-listed company that has agreed to buy Teck in an effort to become a copper powerhouse – the deal goes to shareholder votes on Dec. 9. Both companies have enormous, nearby copper mines in northern Chile and the plan is to put their operations together to boost production and cut costs.
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In April of last year, well before Anglo and Teck began their courtship, BHP pitched a US$39-billion offer to buy its smaller rival. Anglo rejected the bid as overly complex, since it required Anglo to do all the heavy lifting. BHP wanted Anglo to sell or spin off its Amplats platinum business and South African iron ore division before the deal would go ahead. Plus BHP’s offer contained no cash – it was an all-share deal, which introduced share-performance risk.
Anglo passed. BHP improved its offer, then improved it again, to no avail. Choosing the all-Canadian approach, Mr. Henry politely disappeared instead of launching a richer, hostile, though simplified, deal. At its own pace, Anglo proceeded with a restructuring that has had only partial success. The sale for cash of some of Amplats’ shares, as opposed to distributing them all to shareholders, left a lot of money on the table. And, so far, Anglo has been unable to sell its diamond business, De Beers. But never mind – Anglo remained independent and had its own plans to emerge as a copper powerhouse.
Mike Henry, the Canadian CEO of Australian mining company BHP, is likely to retire in 2026.Fred Lum/The Globe and Mail
Facing two deadlines – his own retirement, date not specified, and the December shareholder vote on the Anglo-Teck deal – Mr. Henry came back for a second whack at Anglo. It was a curious, ultimately doomed attempt that left shareholders perplexed.
Some time last week, according to various news articles, BHP approached Anglo with a new offer, this time composed of cash and shares. It was reportedly pitched between 31 pounds and 35 pounds a share, representing a premium of 10 per cent to 30 per cent, with no messy conditions. Bloomberg broke the story last Sunday, triggering BHP to say that it “is no longer considering a combination of the two companies.”
The offer value was not revealed, denying Anglo shareholders the ability to learn why it was not used as the floor price for negotiations. But the Anglo directors had no fiduciary obligation to disclose the price if they determined that it was nowhere near as promising as the potential value that could be created by merging Anglo and Teck. Still, the quick retreat did not cover Mr. Henry with glory. With Anglo close to nabbing Teck, you would have thought he would have entered the combat theatre with all guns blazing.
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BHP’s quest for Anglo, while botched, says a couple of things. The first is that, while capital discipline is admirable, sometimes it is worth paying up for a hot commodity – copper in this case – that could get even hotter as big deposits become harder to find. The second is not to assume that the copper-triggered consolidation game is over just because of BHP’s retreat and Anglo’s embrace of Teck.
In the short term, there is still time – barely– for another company to go after Anglo. Glencore, which shares ownership of the rich Collahuasi mine in Chile with Anglo, is an obvious suspect, all the more so since the Swiss commodities giant is notorious for aggressive behaviour. Rio Tinto, which is also keen to expand its copper portfolio, is another potential candidate. Of course, either Glencore or Rio could bid for Anglo after it merges with Teck, though Teck’s QB2 copper mine in Chile, because of its relatively low grade, is less attractive than Collahuasi (Glencore went after Teck two years ago and settled for its coal business).
In the medium- to long-term, Glencore and Rio are the ones to watch. Both are copper fanatics and the two companies have toyed for more than a dozen years with the idea of merging. When he was CEO of Glencore, Ivan Glasenberg approached Rio with proposals at least three times. He was also attracted to Rio’s iron ore, the glaring hole in Glencore’s production suite. What seems certain is that, with so few large-scale copper targets left, the big, bad and bold will emerge on top.