April 25, 2024 - Diversified miner BHP said April 25 it made a proposal for a potential takeover of another large miner, Anglo American, in a major deal that would give it exposure to future-facing commodities like copper.

BHP proposed an all-share deal valued at GBP31.1 billion ($38.9 billion). Both the miners confirmed the proposal April 25, which is non-binding and subject to conditions.

"The combined entity would have a leading portfolio of large, low-cost, long-life tier 1 assets focused on iron ore and metallurgical coal and future-facing commodities, including potash and copper," BHP said.

The development received varied responses from Asian market sources.

Iron ore sources told S&P Global Commodity Insights that they generally understood that the iron ore business might not be part of the deal, so they were not too concerned about the impact of the deal on iron ore futures.

A Chinese source said Anglo's South African iron ore business has been impacted by poor delivery from the region in the past few years and it doesn't sound like a "good" deal for BHP.

Anglo had kept its 2024 iron ore output guidance unchanged at 58 million-62 million mt, but cautioned that Kumba's results were subject to external logistics conditions. Anglo's iron ore output in 2023 rose 1% year on year to 59.9 million mt in 2023.

The proposed takeover will be "preceded by separate demergers by Anglo American of its entire shareholdings in Anglo American Platinum Ltd. and Kumba Iron Ore Ltd. to Anglo American shareholders," Anglo said in a separate statement. Anglo American Platinum, also known as Amplats, and Kumba Iron Ore are both listed in South Africa.

"But in any case, the merger of the two giants would be 'explosive' news," a source said.

An international trader said if the deal goes through, it could concentrate too much coking coal capacity under one name and make the market monopolistic.

Anglo's metallurgical coal production stood at 15 million mt in 2023, up 7% year on year. The company's 2024 output guidance was at 15 million-17 million mt for met coal.

Its production and mine handling were always a challenge, so this deal could help streamline things, a second international trader said.

Other market participants said the merger could increase the spot liquidity of coking coal in the market.

Anglo also has a large exposure to copper assets. In 2023, Anglo produced 826,000 mt of copper, up 24% from 2022.

Platts assessed the 62% Fe Iron Ore Index at $118.85/dry mt CFR North China on April 24, up $5.2/dmt from April 23, while benchmark Premium Low-Vol Hard Coking Coal was unchanged on the day at $240/mt FOB Australia April 24, S&P Global Commodity Insights data showed.