Newscasts - Copper is M&A gold

Quarterback Resources

18/09/2025 09:11

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Description: Anglo American’s $50 bln merger with Teck shakes up the field of possible deals among miners digging up the metal whose conductivity is key to the energy boom. In this Viewsroom debate, Breakingviews columnists drill down on the impact.

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Video Transcript:

The views expressed on this podcast are those of the participants, not of Reuters News.

So, the pushback from Teck shareholders would be like, why are you just handing over this company without a premium when it's a lot cheaper? And I think the answer to that, which I think seems to be good enough for the Keevil family at the moment is that the scale of these synergies that you unlock by doing this deal in Chile mean that it's better all around. And I think the fact that both companies' share prices rose 10% plus following the announcement of this deal kind of underlines that.

Copper is a key ingredient in some of the biggest technological advancements in the world at the moment. So, think artificial intelligence and electric vehicles, but it's also at the heart of a $50 billion merger that is the latest in a frenzied round of M&A involving the world's biggest mining companies. The two protagonists are London-based Anglo American led by CEO Duncan Wanblad, and Teck Resources from Canada, who are combining in a nil-premium merger where the combined entity will be able to cut costs. But this deal is not happening in isolation. Last year, BHP tried and failed to buy Anglo American. Before that, Glencore tried and failed to buy Teck. Now Anglo American and Teck are getting together. Will this combination be more successful? And how will thwarted rivals respond? Why is there so much M&A activity in the mining industry? And what is driving these companies to join forces? The answers to this and more is in this week's Viewsroom. It's Aimee.

And it's Jonathan, and it's the Viewsroom, the weekly podcast that takes you, the listener, inside a lively debate with Breakingviews columnists from around the world. And this is a really interesting one for us to be focusing in on because not only is this a huge deal, this is an over $50 billion merger after we've had years of waiting for the M&A pipeline to unclog. It's enormous, it's cross-border, it's involved in a commodity that's part of this whole trade war slash national defense industrial policy dynamic that's going on in the world right now, right? Because we've had big US tariffs on copper, we've had Trump getting angry about, I think there was like a hold-up to a copper mine in Arizona or something. There was a bunch of kind of developments in other narrow commodity markets, like rare earths and so on. But this is really like the daddy of them all, right, like copper is so fundamental to modern life. This isn't something that somebody can come in and just like corner that market for a certain geography, right?

Absolutely. And I think this is- we've written an awful lot about copper in various different machinations. And I must preface this whole conversation, Jonathan, that we are having with the fact that we are recording this on Tuesday, our podcast goes out on Thursday. And this is a live deal that we're talking about. So, we're hoping that this will all still be very current. And I think it will be anyway, because we're going to take, we'll take you through why, as we said, this is just such an interesting market. Why there's been so much M&A, and huge M&A, not like small little deals. These are huge, big tie-ups, attempted tie-ups, involving lots of really interesting CEOs as well. And for this discussion, we have George Hay, who is the head of EMEA and also something of a mining expert, and Antony Currie, who is in Australia, home of many, many mines. So, George, Antony, you are very welcome to the Viewsroom.

Hey there.

Good to be here.

So, if you don't know much about mining, George, I think you would probably be a very good person to just kind of walk us through, first of all, I suppose, more broadly, just a little bit about copper, why this is so interesting, and also why we're seeing so much M&A activity in this sector?

Yes, well it's quite simple with copper. I mean copper is the key, one of the key metals for the energy transition, drive to decarbonize the world, and copper is integral to conducting electricity. That's why it's so important. And basically, all the big miners are keen to kind of grow their exposure to copper. But not all of them are actually in the kind of driving seat to do so. If you look at people like BHP and Rio Tinto, the biggest by market capitalization, they're historically been massive in iron ore, which is still chugging along, but it's not kind of, the growth trajectory on that is likely to be less exciting than copper. So, everyone's trying to get more copper. And a key factor that's important here is there are two ways to do that, to get more copper. One would be to just find more mines, dig up more of it. But the other way is to buy the mines, or the corporate entities, that produce a lot of it already. This is what mining bankers and professionals talk about, the buy versus build. And there's a big back and forth about whether it makes more sense to buy or build, that's a function of how high the copper price is. But a key thing that's happened in the last couple of years, since the COVID era, is mining costs have inflated. So, if you're building, yourself, the costs of kind of delivering a really big copper mine have gone up quite a lot. And the problem with that is that it makes it difficult to get a return on that. Hence the kind of frenzy of, flurry of interest you've seen. This really kind of kicked off in the middle of last year when BHP came in for Anglo American. Anglo has quite a lot of copper, that was interesting to BHP. Then that kind of didn't actually happen in the end. And we've had a kind of hiatus since then, but it's always been kind of quite possible that it would come back for the reasons we were talking about earlier, and it now has with this Anglo-Teck deal.

Right, and just to kind of size, like the order of magnitude we're talking about here, right? Because I know I've seen estimates about AI is going to add a million tons of copper demand a year, and we're already at like what, like 25, 26, right? And I've just seen, I was just checking Workspace this morning, copper future prices on the LME are already up 16% this year, they're over 10 grand. So, like, this is like really juicy, right, this big lots of demand that's coming through that all these guys are after.

Yes absolutely. And there is a kind of interesting dynamic where the copper price is quite high. It's not like the copper prices in the doldrums. Copper price is high, as you'd expect because there is an assumption of a lot of demand coming through, because of the energy transition. And also, an equal assumption that the supply might not be there to keep up with it. So, there's something structurally underpinning copper prices, but it's still the case that it's not a no-brainer to just dive into some random place and dig up a whole load yourself, because the returns on it are questionable.

Right, I want to pull in Antony here as well, because we've had like a ton of just like, a roulette wheel of deal talk going on, right? Like Aimee was saying, we had Glencore going for Teck, we have BHP going for Anglo, we had Glencore and Rio Tinto. We had all this kind of stuff. Like I feel like at this point, you can just kind of throw the names into a hat and pull them out at random. Like I don't know, Antony, is there, like looking at this at the global view, as George was saying, you can't really just like randomly run around and start setting up mines, right? So, I presume at a certain point it just becomes a consolidation game. All these guys get bigger and then it's just figuring out like whose mines are next to each other's so that they can like combine operations or whatever. Or is it more complex than that?

I don't think it's much more complex than that. I mean, I'm sure we can find a couple of other wrinkles, but I think BHP is a great example of this. It has both bought itself, its way into the business, with a couple big and smaller acquisitions, and tried to build its own. I mean it's difficult to build mines, the one you referenced earlier in Arizona, I think it was Arizona, the Resolution mine, that has been stuck in environmental and social hell for quite some time for those who are trying to build it. And that is Rio Tinto and BHP. At some point that may well resolve itself. We keep seeing court cases going one way or the other. And as you mentioned, President Trump has weighed in a couple of times as well. So yes, it does sort of become a one point, at some point just that, all right, let's go out and buy them. But also, don't forget, miners go through this M&A cycle every now and again. And in the last one, going back, what is it, 10, 12 years, George? Maybe even further, I'm forgetting how old I am now. They basically, a lot of them basically overpaid and got told off by shareholders and then sort of sat back. So now you have BHP CEO Mike Henry, who since he took over just over five years ago, around five years ago, has kept saying, I'm going to be disciplined, but not going to overpay. You get that from most of them. Of course, you often hear that and then they end up overpaying anyway. That hasn't happened yet. And it isn't happening in this deal because it's a nil-premium deal, but you always kind of wonder when it's going to happen.

Yes, that's a very good point Antony's making, it really is a kind of mantra. Miners lost so much money like around 2010, 2011. It was like hugely embarrassing, and people lost their jobs. And, yes, part of the reason why BHP's bid for Anglo last year didn't really go anywhere is because Mike Henry just didn't want to overpay. And, and I don't think he was particularly penalized for that actually by shareholders, because shareholders didn't want him to either, because of the unpleasant memory.

I'm sort of curious about this because I think the drama of all of this is really interesting. And if you imagine that this deal is just happening now, going ahead, these other bidders who were interested in these companies, actually swallowing up these companies. What does Glencore do? What does BHP do in this situation? What do you kind of think, Antony and George? So, Antony, you're BHP, and George, you are Glencore.

Good, all right, lucky me, it's just a dream come true.

Why do I have to be Glencore?

I'll be honest, I think, and it's this, I think was apparent to us pretty early on, so like within a day, BHP is probably going to sit on the sidelines on this one, and it might not like it, but it's going to do it, for a number of reasons. I mean a lot of things have changed, if you look at BHP as a whole. First of all, its chairman has changed, so there's a new guy running a board. That's Ross McEwan who Brits will know him as a former CEO of Royal Bank of Scotland. He then came back Down Under.

Now NatWest.

New Zealander, I think, came back Down Under and then ran National Australia Bank until last year. So that's changed. And also, I think we're probably going to see Mike Henry, the CEO, he's probably going leave in the next year and a half, two years, if not a bit sooner. That's not confirmed, it's just reading the runes a bit. So, if you're the new guy or the old guy about to leave, do you want to either taint your reputation by doing a bad deal, or taint your reputation by not doing a deal? It's kind of a tricky thing to do, right? But you're sitting there thinking, what do I do now? Especially if you're Mike Henry. But also, some fundamental financial issues have changed. So, number one, of course BHP went after Anglo, it was going to pay in stock. So Aussie stock. So, if you'll sitting there looking at it now, Aussie company trying to buy a British-listed company, the Australian dollar's gone down about 7% against Sterling, against the Pound, number one. Number two, since the deal was first made public in April last year, the BHP-Anglo deal, BHP stock has dropped around 10%, whereas Anglo's stock was up about 20% around the time of the deal being announced last week. So, if you take just that last offer that BHP made, that valued just the equity, and it was a really complex deal, we won't get into that, but just valuing the stock itself at about, I think I'm right in saying it was GBP26 billion. That's now worth, using the shareholder structure they were using last year, that's then worth about GBP21 billion, because of all these changes just mentioned. And at the moment, Anglo's worth about GBP30 billion. So, if you're BHP, you're thinking, last year we were going to give them 18% of the company and that was looking a bit expensive. Now we've got to give them probably 25% of the combined company just to match the price Anglo's currently trading at. And that's not even thinking about a premium, which you probably have to do to try and break up this deal. Which means you really have probably overpay. And you're not going to be able to offer the same kind of cost cuts and synergies that we think or that actually that we've seen, Anglo and Teck say they can do in Chile. So, for all those reasons, and we can talk about coal as well if you want, but for all these reasons, even before getting into the coal assets that Anglo has, if you're Mike Henry, you're probably going this is just not going to work this year.

Okay.

We just, I'd just like to say we've guaranteed a BHP, like massive premium cash offer, like sometime this week, as a result.

Well, we're not excluding the fact that they might do that.

As I believe, as I believe I kind of pointed out last week, you could, Henry may have a couple of tricks up his sleeve, but yes, I may well have just jinxed my own prediction that he will sit on the sidelines.

Yes well, yes well let's.

Okay. George? Glencore.

Well, I think in order, in order to kind of explain why Glencore, where Glencore is on this, you probably need to explain a little bit about how the actual deal that we're talking about works with Anglo-Teck. The appeal for Anglo and Teck in doing this what you would usually do in this situation is have Anglo taking over Teck and paying some kind of premium for it. What they're actually doing is a nil-premium merger. So, then there is no premium being paid. The reason why both sides are kind of interested in doing that is because they have these two mines in Chile, which is the big, one of the big copper-producing countries in the world. They've got these two massive mines called Collahuasi and QB, and they sit next to each other. And in the uncomplicated way that mining works, if you have adjacent mines, it just makes synergies easier to kind of create. And so basically the name of the game is, they just want to kind of combine these things and you can create billions and billions of dollars of synergies by doing that. And so that's the appeal for them. Where Glencore comes into this is that Collahuasi, one of these mines I was mentioning, that's only 44% owned by Anglo. Another 44% is also owned by Glencore. So if what is likely to happen now happens, i.e., you crunch these two together, then Anglo and Teck worked out that there's going to be $1.4 billion of extra EBITDA that they could get from meshing these two things together, and a big chunk of that will go to, well, 52%, to be exact, will go to Teck and Anglo. But a big chunk of the rest of it will go to Glencore. So, Glencore will kind of gain by not doing anything. And so, the question for Glencore is really whether it wants to try and break up this merger by using it's not very highly valued shares relative to the two companies who are actually, like Anglo and Teck, to kind of come in for, probably Teck in this case. Or whether it wants to kind of sit back and just make some money anyway by watching Anglo and Teck come together. And just to make an already complex situation even more complex, basically, what Glencore could do is explore a combination with Rio Tinto, which is one of the two big companies along with BHP that we mentioned at the start. Rio and Glencore had some conversations about tying up last year and they kind of went away, but the fact that Glencore will be more attractive given the money it's going get from Chile, and a couple of other factors, such as Rio's got a new boss and like everybody else wants a slice of the copper pie, Glencore has lots of copper. That might mean that actually, as a result of Anglo-Teck happening, you might see Glencore-Rio happening. And if that's at all comprehensible, I salute you.

Right, and just to lean on the CEO, just to lean on the CEO point there a little bit, because there is something hyper personalized and sort of almost dynastic about some of these companies, right? Because Teck, you have this very like proud Canadian dynamic going on where, as I understand it, and correct me if I'm wrong here, part of the pushback to the previous approach was this kind idea of like Canada's not for sale. And the Keevil.

Yes, the approach from Glencore, yes.

What's that?

The approach from Glencore, yes, the Keevil family, who own a big chunk of Teck, had a problem with that. And yes, exactly like you're saying, Canada is not the easiest place to buy these kinds of assets. And we've already seen a little bit of pushback, not a huge amount of pushback, not from Anglo's perspective probably a worrying amount of pushback, but some people are just pointing out, Teck shares have got a fair bit cheaper compared to last year, and as we just said, they're not getting a premium, so the pushback from Teck shareholders would be like, why are you just handing over this company without a premium, when it's a lot cheaper? And I think the answer to that, which I think seems to be good enough for the Keevil family at the moment, is that the scale of these synergies that you unlock by doing this deal in Chile mean that it's better all round. And I think the fact that both companies' share prices rose 10% plus following the announcement of this deal kind of underlines that.

So, Antony, if I could ask you, and again, I don't want to put you in a position where you end up doing some sort of prediction that gets unraveled soon. But is there anything that could, I guess, unravel this deal? As in what could possibly happen that maybe Teck just says could at this point Teck shareholders say no? It sounds like it's unlikely that one of the big miners will come in and gatecrash this. Would I be right in thinking that?

Yes, I think so. It's intriguing. You've got a Canadian involvement in the two big mining players you mentioned as well. So, BHP CEO Mike Henry is Canadian, or part Canadian, and the chair of Rio Tinto is Canadian. So, they both kind of know the lie of the land there. So, the fact we haven't seen either of them yet do anything not to tempt fate, or maybe I'm tempting fate. I think they're probably not going to jump in with Teck. Also, I think it goes back to what George was saying. Those synergies that Teck and Anglo can get. Yes, Glencore might be able to get them, but why bother when you can just sit back and enjoy someone else doing the work? Rio and BHP can't do that. So, they can't really go after Teck in a really meaningful way and offer a premium and get the same synergies, right? It's the same kind of thing. You'd have to end up overpaying for it. And Rio arguably overpaid for a lithium company last year under the previous CEO, and BHP doesn't want to overpay. So, I think it's very difficult to see either of those two as interlopers. Could someone else come in? Could Freeport-McMoran in the US come in? Maybe? I think we've seen them more as another takeover target. So, what else could break it up? Shareholders seem, most shareholders, so, should be, judging by what we're seeing in the market, what, as George mentioned, and by not seeing any activists jump out yet, they still could, I don't think there's any momentum yet to try and break up the deal within the shareholder bases of these two companies that are trying to merge. So, at the moment, it seems like it's probably going to go ahead.

Yes, we've been speaking to bankers and investors in London who are interested in this. And some people think that there's a possibility that Rio or even BHP buy Teck and then try and establish some kind of joint venture with Teck, between Teck and Anglo in order to get those synergies. But it's obviously a much more convoluted way of doing it. And it's a kind of multi-year, it'd be a bit of a palaver to do. So again, I think you end up where Antony just was, which is kind of less likely, it's less obvious that they should do that. The only caveat to that is just that kind of, when everyone's kind of blood is up about and it's all like you don't want to end up without a partner, people could do some pretty odd things. So, let's see.

Yes, I'll just point out on the BHP side, a couple of things also sort of speak to them probably not wanting to get involved. One, one thing that they really liked about the deal last year, and they weren't really pushing it publicly, but they were talking about it on the quiet, was the coal assets that Anglo American has down here. Because they are, much like the Chile mines we just talked about in this deal, the steelmaking coal mines that BHP and Anglo have are right next door to each other, and you could just almost hear them salivating about the cost cuts there, one train line to rule them all, everything, it was like, it was amazing, they thought they could get so much money from it. Problem is, Anglo's mines have had several problems with fires recently, to the point where Anglo was trying to sell them off, and they got, was it Peabody Energy in the States to agree to buy them a few months ago. Peabody pulled out last month because they said all these fires constituted a material adverse change. So that deal's now done, although Anglo might sue. But if you're BHP you're sat there thinking, yes, we know, we don't particularly like coal, but we'll keep what we've got, but do we really want to take on these problematic assets now? So, I think that's probably done as well. Also, BHP has actually done quite a good job of increasing its copper assets. In the past 12 months up to the end of June, it produced I think two million tons. So right up there. So, I think second in the world, I think, as a producer, that's a 28% increase over three years, I think, they were saying. So, and part of that was done with a merger, they bought OZ Minerals down here two or three years ago. So, they are progressing quite nicely, thank you very much, with what they've got already, so, taking all that, plus what I said earlier in mind, I just don't think BHP wants to get involved in this at the moment, or can't afford to.

Well, it's still lively, there's a lot to play for, and whether BHP gets involved in this one, seems like there are a lot of other combinations that might happen. So, let's leave it there for the moment. Antony, George, thank you so much for joining us on the Viewsroom.

Pleasure.

Thanks.

Thanks, guys.

Thanks for tuning in. This podcast was produced by Sheryl Peña in New York and Gregory Garner in Toronto. You can listen to a new episode of the Viewsroom every Thursday on the Reuters app or your favorite platform. And don't forget to tune into our sister podcast, The Big View, every Tuesday, as well as the other great podcasts from the Reuters team. If you like what you heard, please follow the Viewsroom and let us know what you thought. And check out our views on the biggest stories in business and finance every day at Breakingviews.com and Reuters.com.