When the world’s largest mining company makes an $8.4 billion bid for another major miner, it’s bound to raise a few questions across the industry.
When BHP made its recent takeover offer for OZ Minerals – an offer that was swiftly rejected – many considered it a further sign the mining giant is pushing to secure more ‘future-facing’ raw materials.
“The deal would fast-track BHP’s desire to get more exposure to the metals needed for decarbonisation and electrification, specifically copper and nickel, after a whirlwind four years under chairman Ken MacKenzie that has seen BHP exit the vast majority of its oil, gas and coal assets,” resource reporters wrote in the Australian Financial Review.
OZ Minerals deemed BHP’s $25-per-share offer insufficient given its strong portfolio of minerals that will prove increasingly important into the future.
“We are mining minerals that are in strong demand for global electrification and decarbonisation … and we have a long-life resource and reserve base,” OZ Minerals chief executive Andrew Cole told investors in a statement rejecting the offer.
“We do not consider the proposal from BHP sufficiently recognizes these attributes.”
The miner also highlighted the quality of its growth projects, its “market-leading” plan for decarbonisation and the strong long-term outlook for copper markets as the global electrification movement heats up.
Some have also speculated that BHP’s attempted takeover of OZ Minerals is directly related to the Olympic Dam operation in South Australia, which BHP has long desired to turn into a Tier 1 asset.
OZ Minerals’ Prominent Hill and Carrapateena copper mines in SA’s Gawler Craton sit on either side of Olympic Dam, and it is believed BHP see value in operating all three “by combining adjacent assets and sharing infrastructure to unlock extra capacity”.
“While the bid for OZ Minerals is partly motivated by a desire to get more nickel into BHP’s Western Australian smelters and refineries, it is mostly about finally solving the puzzle at Olympic Dam,” according to the Australian Financial Review.
Regardless of the motivations behind the takeover bid, many believe BHP’s desire for OZ Minerals remains strong and a potential deal continues to be a real possibility.
According to a note from Bell Potter, an Australian stockbroking and financial advisory firm, an improved offer could soon be made.
“In our view this puts OZL (OZ Minerals) completely in play and, with an open register dominated by non-strategic institutional investors, we believe the chances of completion of the acquisition of OZL are high,” Bell Potter said in its note.
“We also believe this will be seen as an initial offer from BHP and that institutions will want to be compensated for the lack of large-cap investable copper producer options on the ASX.
“In the first instance, we expect a higher cash bid from BHP as the deal makes strategic sense and offers production growth in a secure jurisdiction. We also believe the scarcity of comparable assets in comparable jurisdictions makes the chances of a competing counter-offer reasonable.”
It appears BHP’s efforts to obtain OZ Minerals may be far from over.