OZ Minerals has turned down a takeover attempt from BHP priced at $25 per share as the battle for green metals heats up.
BHP’s proposal represented 32.1 per cent premium to OZ Minerals’ closing share price of $18.92 on August 5.
“We have a unique set of copper and nickel assets, all with strong long-term growth potential in quality locations,” OZ Minerals managing director and chief executive officer Andrew Cole said.
“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. We do not consider the proposal from BHP sufficiently recognises these attributes.”
BHP’s proposal is subject to the completion of confirmatory due diligence to the satisfaction of BHP, entry to a scheme implementation agreement and the unanimous recommendation from the OZ Minerals board that the copper miner’s shareholders vote in favour of the proposal.
“Our proposal represents compelling value and certainty for OZ Minerals shareholders in the face of a deteriorating external environment and increased OZ Minerals operational and growth-related funding challenges,” BHP chief executive officer Mike Henry said.
“We are disappointed that the board of OZ Minerals 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.”
OZ Minerals was trading as high as $29 in January, but the company has since felt the pinch of slumping copper prices, with its share price dropping to $16 in mid-July.
In the wake of the announcement, OZ Minerals shares had jumped 35 per cent on the day to $25.45 (price as of 10:25am AEST on August 8).
OZ Minerals said the “unique nature” of its core business was as another reason it had rejected the offer, with the company located in a “Tier-1 mining jurisdiction with long mine lives, first quartile cost positioning and extensive strategic optionality”.
The copper miner also highlighted the quality of its growth projects, its “market-leading” plan for decarbonisation and the strong long-term outlook for copper markets as the global electrification movement heats up.
Industry commentators have deemed the BHP takeover a further sign the mining giant is pushing to secure more ‘future-facing’ raw materials.
“The deal would fast-track BHP’s desire to get more exposure to the metals needed for decarbonisation and electrification, specifically copper and nickel, after a whirlwind four years under chairman Ken MacKenzie that has seen BHP exit the vast majority of its oil, gas and coal assets,” resource reporters wrote in the Australian Financial Review.
It has also been speculated that the takeover attempt is directly related to the Olympic Dam operation in South Australia, which BHP has long desired to turn into a Tier 1 asset.
OZ Minerals’ Prominent Hill and Carrapateena copper mines in SA’s Gawler Craton sit on either side of Olympic Dam, and it is believed BHP sees value in operating all three “by combining adjacent assets and sharing infrastructure to unlock extra capacity”.
“While the bid for OZ Minerals is partly motivated by a desire to get more nickel into BHP’s Western Australian smelters and refineries, it is mostly about finally solving the puzzle at Olympic Dam,” according to the Australian Financial Review.
Regardless of the motivations behind the takeover bid, many believe BHP’s desire for OZ Minerals remains strong and a potential deal continues to be a real possibility.
According to a note from Bell Potter, an Australian stockbroking and financial advisory firm, an improved offer could soon be made.
“In our view this puts OZL (OZ Minerals) completely in play and, with an open register dominated by non-strategic institutional investors, we believe the chances of completion of the acquisition of OZL are high,” Bell Potter said in its note.
“We also believe this will be seen as an initial offer from BHP and that institutions will want to be compensated for the lack of large-cap investable copper producer options on the ASX.
“In the first instance, we expect a higher cash bid from BHP as the deal makes strategic sense and offers production growth in a secure jurisdiction. We also believe the scarcity of comparable assets in comparable jurisdictions makes the chances of a competing counter-offer reasonable.”