News that Britain’s Anglo American and Canada’s Teck Resources plan a $50B merger is not only one of the largest mining deals in the last decade, but could mean bigger is now better.
The new company will have more than 70% exposure to copper and will rank among the five largest producers in the world. It’s also geopolitically important, set to impact trade flows, energy investments, and the industrial policies of a number of countries.
Anglo American and Chile’s state owned Codelco quickly followed with a deal to jointly manage their Los Bronces and Andina copper mines near Santiago, a partnership that potentially unlocks another 2.7M tonnes of copper production & $5B in value over a 21-year period.
Both decisions shocked markets, but I suspect it may be just the start of a race by companies and countries to monopolise copper stocks in a world not only facing ore shortfalls & soaring demand, but a growing need to dominate the market.
Given copper’s new found status as a globally critical metal essential for energy & security, the move to shore up supply would seem to make sense, but looks certain to disrupt the business of copper.
The USA & China are already divvying up the world into friendly copper camps and keep upping the ante. Recently the US announced a $5B dealmaking fund to boost supplies of critical minerals while also touting new opportunities in Ukraine, Greenland and—most strategically—the Congo in Africa.
Analysts see a new form of global copper consolidation going on, suggesting that Merger & Acquisition activity is accelerating alongside more earn-in and joint venture deals for early-stage exploration like Ivanhoe Mines and Pallas Resources recently announced large-scale partnership.
Australia is already a copper giant dominated by the mining behemoth BHP—rejected by Anglo 3 times—which has for the moment pivoted from headline grabbing take overs by channelling $2B to grow through brownfield developments and smaller stakes.
Acquisitions are a rich diet of course and only time will tell what the implications for the copper industry will be, but you can be certain large is now the story.
Cheers, John Fennell