Just as BHP quibbles about its $25 a share offer being turned away too soon by OZ Minerals’ board, JPMorgan’s sell-side analysts were chiding the bigger miner for waiting too long to make a move.
BHP could have made a move on OZ Minerals in 2020, when the latter’s shares were half BHP’s $25 rejected bid. Will Willitts
“We are surprised how late BHP has left it to bid for OZL. Prior to 2020, OZL consistently traded below $12ps [per share],” JPMorgan’s Lyndon Fagan, Al Harvey and Devwrat Vegad said in a research note sent to clients on Monday afternoon.
“From 2020 onwards, OZL released study after study on its growth projects, which forced the market to value them, re-rating the stock. However, we believe there was a line of sight on these projects prior to 2020.”
The trio said the $25 per share rejected bid was a 43 per cent premium to their $17.45 per share net present value.
They said OZ Minerals would have been 4 per cent odd of BHP’s $US135 billion market capitalisation, and could go from 2 per cent of BHP’s EBITDA to about 10 per cent in the long term.
“Aside from potentially making the Carrapateena block cave bigger, it’s hard to see the value uplift that BHP can create on OZL’s asset base.
“…But it does make strategic sense. OZL’s Prominent Hill underground asset is potentially sub-scale for BHP, however, should the company successfully convert the large, inferred resource into reserves, then at least it’s long life,” they said.