BHP’s unsolicited £31bn takeover of Anglo American has shaken up the mining industry and sparked speculation that the venerable company is ripe for sale or break-up.
Anglo rejected the preliminary offer on Friday as “highly unattractive”, but investors expect BHP to come back with an improved offer or for a rival to emerge with a rival offer.
“I think there could be a big risk of intrusion,” said a major investor in the mining sector. “The details of Anglo are on every CEO’s desk, I can assure you.”
Anglo, which holds its annual general meeting in London on Tuesday, is a sprawling company that includes sought-after copper mines in Peru and Chile, complex iron ore and platinum operations in South Africa and the 136-year-old diamond company De Beers.
Rival miners with the clout to make a competitive bid include Anglo-Australian miner Rio Tinto and UK-listed Glencore. North American rivals such as Mark Bristow’s Barrick Gold are also likely to weigh their options, while a bid for all or part of Anglo American from Brazil’s Vale, India’s Vedanta Resources or a Chinese company such as Zijin Mining cannot be ruled out, analysts said.
Glencore: Is it a better fit than BHP?
Analysts and investors say Glencore is the most promising alternative bidder for Anglo, alongside its London-listed rival Rio. Its chief executive Gary Nagle has likely been scrutinizing Anglo’s business and BHP’s proposal since news of the move broke last week.
The Swiss-based trading and mining company is the most natural acquisition company among the mining majors and was founded by former CEO Ivan Glasenberg, who favored buying existing assets over developing new mines. The largest shareholder remains Glasenberg, which owns around 10 percent of the company.
Analysts and market insiders say many of Anglo’s mines would fit into Glencore’s portfolio better than BHP’s. Glencore and Anglo each own 44 percent of the coveted Collahuasi copper mine in Chile, meaning a takeover would give Glencore almost complete control.
While BHP has asked Anglo to spin off South Africa’s Kumba Iron Ore before a takeover, Glencore would likely integrate it into its own operations in the country. The Swiss company has coal mines in South Africa and has long been considering setting up an iron ore business. The company trades the metal but does not mine it. It would also be attracted to Anglo’s Brazilian Minas-Rio iron ore project for the same reason.
“It’s a better fit than BHP,” said Ben Davis of investment bank Liberum, adding that Glencore “seems to have an endless range of corporate strategies compared to other people.”
Glencore is already in the middle of a $9 billion takeover of Teck Resources’ coal division.
The challenge for Glencore could be the size of the deal, Davis added. Glencore’s market value is greater than Anglo’s but half that of BHP. Glencore shareholders would therefore only have around 60 percent of the combined company available, he said.
Rio Tinto: desire to diversify
Rio Tinto’s $118 billion market capitalization is also smaller than BHP’s, but the world’s second-largest miner is big enough to make an all-share bid for part or all of Anglo.
The UK-listed mining company is heavily dependent on its highly profitable iron ore operations in Western Australia and is looking to diversify. The company continues to expand the Oyu Tolgoi copper mine in Mongolia, but otherwise has limited options to increase production of the metal, demand for which is expected to boom during the energy transition.
“In Rio, the need for diversification is even clearer,” Davis said. Rio is developing the world’s largest mining project in the Republic of Guinea, but this mine will only yield iron ore.
Unlike BHP, Rio also has operations in South Africa and an existing diamond business, which could help it manage Anglo’s De Beers diamond division. Anglo and Rio also both have primary listings in the UK, which could facilitate any transaction. However, Rio does not want Anglo’s steel coal assets since it exited the coal business in 2018.
Barrick Gold: Copper in sight
The Canadian-listed company Barrick Gold could also be interested. The world’s second-largest gold miner has sought to improve its access to copper under South African privateer Mark Bristow.
Bristow founded gold miner Randgold Resources in South Africa in 1995 and grew it into a darling of the London Stock Exchange before merging with the larger Barrick in 2018.
A return to South Africa and the LSE to buy Anglo American would be a major coup for Bristow, said John Meyer, mining analyst at SP Angel. “It would be that main dish for Mark Bristow’s career.”
Other potential applicants
One person who knows Anglo better than most is former boss Mark Cutifani, who was appointed chairman of Vale’s independent base metals division in July 2023. The Brazilian iron ore mining company spun off its copper and nickel-focused unit into a new structure last year. Selling a 10 percent stake to Saudi Arabia for nearly $3 billion.
At the time, Vale said it would invest up to $30 billion in new projects over the next decade and could consider an IPO or merger within three years.
With Cutifani at the helm and money to spend, the company is in a better position than most to target Anglo or some of its mines, but does not have its own shares to complete an all-stock deal.
A state-backed Chinese miner such as Zijin Mining or an Indian group such as Vedanta could also try to trump BHP’s bid or capture individual Anglo-American assets, Meyer said.
Vedanta founder Anil Agarwal was Anglo’s largest shareholder between 2017 and 2019. Due to a complex structure, there was speculation that he was planning a takeover bid for the entire company.
China has a huge need for copper and iron and controlling the mines that produce them is a top priority for Beijing.
“I think it’s reasonably likely that the Chinese will intervene,” said Meyer. “The question is, which Chinese state-owned company is best suited to do this?”
Rio, Glencore, Barrick and Vale declined to comment. Vedanta and Zijin have been contacted for comment.