BHP, the world’s top miner, is approaching its biggest acquisition in a decade

BHP Group Ltd. boost bid for OZ Minerals Ltd. to value Australian miners $6.34 billion, as they seek to produce more copper and nickel are needed for electric vehicles, wind turbines and solar farms.

OZ Minerals said it intends to recommend shareholders vote in favor of BHP’s revised offer of 28.25 Australian dollars, equal to about $18.90, a share. A completed deal will represent BHP’s biggest acquisition since 2011 when it bought Petrohawk Energy Corp for more than $12 billion.

BHP, based in Melbourne, Australia, approached Adelaide-based OZ Minerals about a potential takeover in August, but its offer was quickly rejected by directors as too low.

Copper cable

A worker monitors 8mm diameter copper cables being rolled before passing through a rolling mill to become cables at the Nexans plant in Lens, northern France, on May 11, 2022. (Photo by Denis Charlet / AFP) (Photo by DENIS CHARLET /AF ((Photo by Denis Charlet / AFP) (Photo by DENIS CHARLET / AFP via Getty Images) / Getty Images)

On Friday, OZ Minerals said it had received a new proposal from BHP to buy the company. The latest offer represents an increase on BHP’s initial proposal of 25 Australian dollars per share. OZ Minerals shares closed at 26.30 Australian dollars on Tuesday, the last session before the stock was halted pending news of the transaction.

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BHP predicts that demand for copper, which is a good conductor of electricity and has a wide range of uses including in construction and electronics, will double in the next three decades. OZ Minerals operates two copper-and-gold mining operations in South Australia, and another in Brazil.

Electric vehicles use four times as much copper as gasoline-powered cars, says BHP, while wind- and solar energy production requires more copper, per megawatt hour, than producing electricity from fossil fuels.

charge an electric car

Tesla cars charging at the Supercharger station on Culver Ave. in Irvine, CA on Friday, January 28, 2022. Electric vehicles use four times more copper than gasoline-powered cars, while wind and solar energy production require more copper, per megawatt ((Photo by Paul Bersebach/MediaNews Group/Orange County Register via Getty Images) / Getty Images)

But global prospects for copper production are hampered by declining deposit quality, water shortages and lack of exploration success, he said.

BHP also wants to produce more nickel, which OZ Minerals has in a project it is developing in Western Australia, where BHP already operates a nickel mine and processing facility. The mining giant last year agreed nickel supply deal with Tesla Inc.

“Where we are really putting our growth emphasis is potash, copper and nickel,” BHP Chief Executive Mike Henry told a conference call last month.

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BHP said the offer was the best and final price, unless a competitor bids.

Global miners including BHP have been cautious about acquisitions in recent years after megadeals during the commodity boom a decade ago led to large write-downs, frustrating shareholders. BHP last year sought to buy Canadian nickel exploration Noront Resources, but lost the bidding war to Wyloo Metals, owned by Australian billionaire Andrew Forrest.

rare earth mine

A view of the MP Materials open pit mine in Mountain Pass, California, U.S. January 30, 2020. Picture taken January 30, 2020. REUTERS/Steve Marcus/File Photo (REUTERS/Steve Marcus/File Photo/Reuters Photos)

“OZ is a nice-to-have,” Mr. Henry said at a conference last month. “It’s not a must-have for BHP.”

BHP now relies on iron ore, the main ingredient in steel, for the bulk of its earnings. It is also the world’s largest exporter of coal joint venture with Japan’s Mitsubishi Corp BHP has recently bet on the transition to a low-carbon world by selling its oil-and-gas unit and approving a $5.7 billion project for a potash mine in Canada.

TickerSecuritylastChangechange %
MSBHFMITSUBISHI CORP.30.7+0.31+1.02%
BHPBHP GROUP LTD.58.74+0.14+0.24%
OZMLFOZ MINERALS18.12-0.43-2.32%

OZ Minerals traded below 16 Australian dollars a share in the weeks before BHP’s initial approach, as recession concerns weighed on copper prices. However, it had traded at nearly 30 Australian dollars earlier in the year, when copper prices hit all-time highs on fears of scarce supplies.

BHP has been given four weeks to conduct an exclusive due diligence, starting Monday.

OZ Minerals Chief Executive Andrew Cole said the revised price better reflects the company’s potential in producing the metals the world needs as the energy transition accelerates.

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Some analysts say OZ Minerals is a good fit for BHP, which runs the Olympic Dam copper mine in South Australia. BHP is also working on a nearby prospect, known as Oak Dam. In August, OZ Minerals said BHP has accumulated an interest of less than 5% in the company.

Some of OZ Minerals’ assets are small when measured against BHP’s existing operations, although they could be developed into larger or longer-term operations, analysts said. BHP counts a majority stake in Chile’s Escondida, the world’s largest copper mine, among its assets.

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