By Nick Toscano
Mining giant BHP has agreed to press ahead with its biggest acquisition in more than a decade, signing a binding $9.6 billion takeover offer for Australian copper producer Oz Minerals to boost its exposure to metals needed in the clean energy transition.
BHP and Oz Minerals said on Thursday they had entered a scheme implementation deed at BHP’s agreed offer price of $28.25 a share, which the board of Adelaide-based Oz Minerals reaffirmed it will unanimously encourage investors to approve.
BHP chief Mike Henry described the deal as highly compelling for Oz Minerals shareholders and would provide “certainty at a time of macroeconomic uncertainty and market volatility”.Credit: Trevor Collens
The signing of the agreement follows four weeks of due diligence, and means that the proposal will now go to an Oz Minerals shareholder vote in “late March to early April”, the two companies said.
“The Oz Minerals board believes that BHP’s offer appropriately reflects the quality, growth profile and strategic nature of Oz Minerals’ long-life copper and nickel assets,” chief executive Andrew Cole said.
“The Oz Minerals team will work closely with all of our stakeholders, including our employees, customers, suppliers and the traditional owners of the land on which we operate, to ensure their interests are prioritised should the scheme proceed.”
BHP, the largest Australian mining company, has been looking to acquire Oz Minerals as part of its accelerating efforts to boost its supplies of copper and nickel, two minerals the world needs much more of in coming years as raw materials in electric cars and clean energy infrastructure. Electric cars require up to four times as much copper as internal combustion-engine vehicles, says BHP, while nickel is a critical ingredient in lithium-ion batteries.
BHP last month sweetened its bid to buy Oz Minerals from $25 a share to $28.25 a share. Its revised offer valued the company at $9.6 billion.
If the deal succeeds, it will mark the Melbourne-based mining heavyweight’s biggest acquisition since it paid $US12 billion for US shale gas producer Petrohawk in 2011.
Oz Minerals has two copper and gold mines in South Australia – Carrapateena and Prominent Hill – located either side of BHP’s vast Olympic Dam mining hub. BHP believes it can unlock significant potential cost savings by combining those assets.
Oz Minerals also has plans to build a new nickel and copper mine at West Musgrave in Western Australia, which could build on BHP’s expansive nickel position in the state.
BHP chief executive Mike Henry on Thursday said the combination of BHP and Oz Minerals’ assets, skills and technical expertise provided a “unique opportunity not available under separate ownership”.
“We thank the Oz Minerals board and management for their engagement through the due diligence process and look forward to working together to continue to take steps forward to complete the transaction,” Henry said.
Based on long-term price forecasts, copper could make up more than 40 per cent of BHP’s earnings by 2030, according to analysts. “This would support the strategy to have about 50 per cent of the portfolio, longer term, made up from copper, nickel and potash,” investment bank JP Morgan said.
The bulk of BHP’s earnings still come from the steel-making ingredients of iron ore and coking coal, which are combined in blast furnaces to churn out liquid metal at steel mills across the globe. Last year, however, BHP sold stakes in several coal mines and offloaded its entire global oil and gas division, partly to free up its ability to spend more on what it terms “future-facing” commodities, including nickel and copper.
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