When OZ Minerals last week agreed to BHP’s increased takeover offer of $9.6 billion it ended several months of speculation over the deal – and confirmed the long-term importance of copper.
Many in the industry saw BHP’s unsolicited play on OZ Minerals in August as a sign that the majors are keen to get their hands on future-facing critical minerals – copper chief among them. And Rio Tinto’s ongoing efforts to secure the remaining stake in Turquoise Hill Resources, taking control of Mongolia’s Oyu Tolgoi copper mine in the process, only strengthens that thinking.
As the world moves towards an electrified future with the goal of net-zero emissions, copper sits comfortably at the centre of the resources vital to that transition.
According to a recent report from S&P Global, copper’s role in building electric vehicles (EVs) and trucks, transmission lines, and solar and wind farms will double demand for the metal in the coming decades.
“Copper – the ‘metal of electrification’ – is essential to all energy transition plans,” the report stated. “But the potential supply–demand gap is expected to be very large as the transition proceeds.
“Substitution and recycling will not be enough to meet the demands of EVs, power infrastructure, and renewable generation.
“Copper demand is projected to grow from 25 million metric tons (MMt) today to about 50 MMt by 2035, a record-high level that will be sustained and continue to grow to 53 MMt by 2050.”
While analysts at Wood Mackenzie predict a smaller shortfall, they share a similar overall outlook for the commodity, saying much more investment is needed to meet near-future copper demands.
The consultancy’s analysis indicates “9.7 million tonnes of new copper supply is needed over 10 years from projects yet to be sanctioned, equivalent to nearly a third of current refined consumption”.
“Copper’s critical role in the energy transition is undisputed,” Wood Mackenzie research director of copper markets Nick Pickens said in October. “It’s the significant pull on the metal’s existing and potential supplies, and the investment required that needs urgent attention.
“To successfully meet zero-carbon targets, the mining industry needs to deliver new projects at a frequency and consistent level of financing never previously accomplished.”
It is these types of industry outlooks that have pushed majors to acquire as many critical minerals – most importantly copper – as possible.
When BHP made its initial takeover offer for OZ Minerals – an offer that was almost immediately rejected because it was felt it did not properly value OZ’s copper and nickel portfolio – many considered it a further sign the mining giant was moving in that direction.
“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,” reporters wrote in the Australian Financial Review at the time.
The successful deal with OZ also means BHP can now consolidate its existing copper holdings in South Australia.
OZ Minerals’ Prominent Hill and Carrapateena mines operate adjacent to BHP’s Olympic Dam mine and smelting operations in SA, about 550km north-west of Adelaide.
The location of these operation – and the synergistic opportunities that presents – was no doubt a factor in BHP’s decision to ultimately increase its takeover bid for OZ Minerals. The $28.25-per-share offer represents a 49 per cent premium on OZ Minerals’ stock price prior to BHP’s initial bid in August.
And BHP is not alone among the majors in its pursuit of future-facing resources.
Despite the fact Rio has faced numerous major setbacks in its pursuit of Turquoise Hill, all signs indicate it will continue its push for the company, underlining its desire to secure a major global copper pipeline.