GlobalData : BHP and Anglo American merger could see emergence of $200bn mining major, says GlobalData

25 Apr, 2024 BHP and Anglo American merger could see emergence of $200bn mining major, says GlobalData

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Posted in Business Fundamentals

Following the news that BHP Group Ltd (BHP) and Anglo American plc (Anglo American) are in talks for a potential merger:

Sathiya Narayanan Jalapathy, Business Fundamentals Analyst at GlobalData, a leading data and analytics company, offers his view:

"As part of its strategy to expand its copper assets, BHP intends to acquire Anglo American realizing the significant growth potential for copper in the future, as momentum shifts towards replacing conventional fossil fuels with the increasing adoption of electric vehicles (EVs) and growing demand for its usage in construction and renewable energy projects. The deal will also strengthen BHP's iron ore market and provide exposure to diamond markets.

"Additionally, the acquisition will help BHP to access the mining industry in South America, where the company currently does not have significant presence. If the deal goes through, BHP will gain access to three of the world's largest copper mines - Collahuasi (with ownership of 44%), Los Bronces (50.1%), El Soldado (50.1%) and Quellaveco (60%).

"The news of the potential acquisition has created interest among investors, with the stock value of Anglo American spiking by 12.3%, and its combination with BHP may well see the emergence of a mining giant with about $200 billion in market value.

"Anglo American became a potential target for BHP as the former continued to post a weak top-line, even as its total debt kept increasing since 2021 as a result of the poor performance of platinum group metals (PGMs) and diamonds due to price fluctuations, geopolitical and economic situations, and other operational constraints. Amidst this, the company has reported a growth of 31.5% in copper sales from $5,599 million in 2022 to $7,360 million in 2023.

"Also, at the end of Q1 2024, Anglo American's copper production increased by 11% to 198,100 tonnes, driven by a 21% increase in output from its Quellaveco site in Peru and a 6% increase in production from Chile. Operationally, the combined entity could have a top line of over $84 billion, EBITDA of over $34 billion, and a workforce of close to 100,000, reinforcing its position as one the largest global players in the mining sector."

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