Home Commodities BHP highlights push for forward-facing commodities with hostile bid for OZ

BHP highlights push for forward-facing commodities with hostile bid for OZ


BHP boss Mike Henry has underlined the mining giant’s determination to grow its presence in so-called future-facing commodities with a hostile $8.4 billion bid for OZ Minerals.

Shares in OZ surged $6.67, or 35 per cent, on Monday to close at $25.59, more than 2 per cent above BHP’s bid price of $25 after the mid-tier copper miner rejected BHP’s takeover offer.

The share price reaction suggests BHP will have to sweeten its offer or that a rival bidder could emerge.

BHP’s offer represents a 32.1 per cent premium to OZ’s last traded price of $18.92 on Friday, which the mining giant said was materially above average broker price targets for the stock.

But OZ said its board had unanimously determined that the indicative proposal significantly undervalued the company and was not in the best interests of shareholders.

BHP has made no secret of its desire to seek growth in so-called future-facing commodities, identifying copper, nickel and potash as key to the world’s future.

For BHP, OZ’s Prominent Hill and Carapateena mines in South Australia would offer synergies and growth options for the mining giant’s existing Olympic Dam copper mine and Oak Dam copper project. Meanwhile OZ’s advanced West Musgrave nickel project in remote WA would provide ore feed for its growing Nickel West business.

OZ Minerals managing director Andrew Cole.
Camera IconOZ Minerals managing director Andrew Cole. Credit: OZ Minerals/TheWest

BHP chief executive Mike Henry said the company’s proposal represented compelling value and certainty for OZ shareholders in the face of a deteriorating external environment and increased operational and growth related funding challenges.

“We are disappointed that the board of OZ has indicated that it is not willing to entertain our compelling offer or provide us with access to due diligence in relation to our proposal,” he said.

OZ managing director Andrew Cole said the company had a unique set of copper and nickel assets, all with strong long-term growth potential in quality locations.

“We are mining minerals that are in strong demand particularly for the global electrification and decarbonisation thematic and we have a long-life resource and reserve base,” he said.

“We do not consider the proposal from BHP sufficiently recognises these attributes”.

BHP has advised OZ that it has acquired a small stake in the company (less than 5 per cent) via “derivative instruments”. Its conditional offer is subject to OZ opening its books for a six-week due diligence period.

OZ has been eyeing an expansion of its Prominent Hill mine, a new Block Cave mine at Carapateena and a final investment decision later this year on the development of West Musgrave.

The Carapateena project.
Camera IconThe Carapateena project. Credit: Oz Minerals

OZ described the BHP bid as “highly opportunistic” given the copper price and its share price are well off the highs they reached earlier in the year.

However analysts at Ord Minnett said they were underwhelmed by BHP’s bid, mainly because the company could have secured the assets for much less a few years ago.

They noted that OZ had traded consistently below $12 a share prior to 2020 and had subsequently released “study after study on its growth projects”, which had forced investors to re-rate the stock.

But RBC Capital Markets analyst Kaan Peker said the offer was compelling and aligned with BHP’s strategy of increasing exposure towards future facing commodities.

He noted BHP’s significant financial clout meant it could develop all of OZ’s growth projects simultaneously, something analysts have previously said could put significant burden on the Adelaide-based company’s balance sheet.

BHP’s bid for OZ represents the mining giant’s second takeover attempt in the so-called forward-facing commodities sector in the past year.

This time last year, BHP launched a failed takeover attempt for Canadian nickel play Noront Resources, which resulted in a bidding war with Andrew Forrest’s Wyloo Metals which the latter ultimately won.

The OZ bid follows the merger of BHP’s petroleum business with Woodside and its move to unify its London and Australian based corporate structure under one entity.

Copper is expected to play an increasing role in the electrification of the globe while nickel is an essential ingredient in the batteries of electric vehicles.

S&P Global predicted last month global copper demand would double from 25Mtpa to 50mtpa by 2035 while the Internation Energy Agency estimated the world would need 60 more nickel mines by 2030.

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