BHP’s OZ Bid Could Signal a New Dawn for Mining M&A – by Megha Mandavia (Wall Street Journal – August 9, 2022)

Australian mining giant BHP Group has been given the cold shoulder by copper miner OZ Minerals Ltd. Markets don’t think that is the end of the story: The world’s most valuable miner may well return with a higher offer. If it does, it will mark the giant’s return to megadeal making—and perhaps signal a turning point for deal activity in mining more broadly.

OZ is playing hard to get, and possibly for good reason. On Monday the company rejected a $5.8 billion takeover offer by BHP, saying it was too low and opportunistic. Prices of copper on the London Metal Exchange are trading around $7,834 per metric ton, down about 20% since the end of last year. Before BHP’s offer, that had punished OZ’s stock too.

BHP, however, is playing the long game: It appears to believe fears of a deep recession may have been overdone. It will be interesting to see if its rivals agree—if so, more bids for OZ could be in the offing. OZ shares closed at 25.66 Australian dollars on Tuesday, slightly above BHP’s offer of 25 Australian dollars a share—after rising about 35% on Monday when news of the offer broke.

Copper, though still sharply down for the year, is up about 12% since mid-July. With large miners generating strong free cash flow, commodity prices down, and the world’s long-term push toward decarbonization still intact—as recent legislative action in the U.S. shows—now might be a propitious time to take a look at new copper or battery metal assets on the cheap.

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