Mining analysts yesterday said the trend of companies making all-share takeover bids for others is set to continue in the near to medium term as South Africa was already a hotbed for mergers and acquisitions (M&A) activity, long before BHPs bid for selected assets of Anglo American.
Although the board of Anglo American has rejected BHPs $39 billion (R741bn) offer for its assets, excluding Anglo Platinum and Kumba Iron Ore, it is expected that the Australian mining giant will heighten its offer.
Mining industry insiders and analysts yesterday said there was also likely to be rival offers for Anglo American from other bigger mining companies, fund holders and global sovereign wealth funds, among others.
The BHP bid for Anglo American has put the mining sector under in spotlight, particularly merger and acquisition activity.
Anchor Capitals mining and investment analyst Seleho Tsatsi told Business Report that South Africas mining sector was awash with M&A activity, apart from BHPs latest moves for Anglo American.
Certainly we can say that were seeing a lot of M&A activity in SA mining at the moment. Balance sheets in the industry are generally quite strong which certainly paves the way for M&A, Tsatsi said.
While the BHPs offer for Anglo American has shone the spotlight on South Africa, the Australian companys plans to spin off Amplats and Kumba have been rebuffed by labour unions and the government.
The transaction would, however, still be a mega deal for South Africa should it sail through.
Theres been a high level of M&A recently in SA mining. Before the BHP proposal for Anglo American, the biggest deal was probably Impala Platinums acquisition of Royal Bafokeng Platinum, Tsatsi said.
Impala Platinum (Implats) has surprisingly initiated retrenchments at Bafokeng, a few months after acquiring the assets, saying this was justified by the continuously depressed world platinum group metals (PGMs) prices.
Apart from the Implats acquisition of Royal Bafokeng, several smaller deals have taken place over the past few years within South Africas mining industry.
For example, Sibanye-Stillwater has been doing several deals in the battery metals space.
On Friday, Sibanye-Stillwater said the $500 million senior unsecured, guaranteed convertible bonds it issued in November last year will be partially to fund the recent acquisition of Reldan acquisition.
The company completed the acquisition of Reldan, a US-based precious metals refiner, last month.
But over the last few years, there have been a handful of companies that have made M&A investments, especially in the copper business.
We have seen several mining companies look to acquire copper assets over the past few years, added Tsatsi.
Glencore pursued Teck Resourcess sizeable copper business while South32 made a recent copper acquisition.
BHP itself acquired Oz Minerals last year.
Moreover, Exxaro has previously stated that copper was one of the commodities it was keeping a close eye on.
According to Tsatsi, the interest in the sector for copper stems from the interesting demand-supply equation for the metal although currently, copper is not a major export for SA especially when compared to other commodities like PGMs, coal, iron ore or manganese.
Anchor Capital believes that there are two reasons for BHPs interest in Anglo American and these include Anglos copper volume growth and the copper price outlook which many believe is more lucrative that other metals.
Anglos Quellaveco Copper Mine project in Peru reached full production capacity in 2023. At current copper prices, its revenue would equate to 10% of last years total group revenue. Quellaveco is one of the biggest new copper projects to be completed globally in the last few years, said Anchor Capital in a separate note.
