BHP makes offer for Australian copper firm Oz Minerals

Australia resources firm BHP has stamped its intention to increase its exposure to copper and nickel by making an unsolicited takeover offer for Adelaide-based copper producer Oz Minerals.

Its indicative proposal to pay A$25/share in cash through a scheme of arrangement values Oz Minerals at around A$8.3bn ($5.7bn) and has sparked a copper-nickel takeover fever in Australia's base metals sector.

Oz Minerals, which has rejected the offer as undervaluing its strategic assets, produced 125,486t of copper in 2021 with guidance of 120,000-135,000t for 2022. It has its mainstay Prominent Hill and Carapateena copper mines in South Australia, which also hosts BHP's Olympic Dam copper mine and its Oak Dam expansion project. Oz Minerals also produces a small amount of copper in Brazil.

"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," BHP chief executive Mike Henry said.

BHP produced 1.57mn t of copper in its July 2021-June 2022 fiscal year from its copper assets in Chile, Peru and Australia and has issued guidance of 1.64mn-1.83mn t for 2022-23. Olympic Dam produced 138,400t in 2021-22 and is expected to increase output to 195,000-215,000t in 2022-23.

BHP has targeted copper and nickel as two of its priority growth commodities expected to benefit from the megatrends of renewable energy, decarbonisation and vehicle electrification, as part of its strategy to focus on so-called future-facing commodities.

While Oz Minerals' West Musgrave copper nickel project in Western Australia is still in its early stages of development, its potential to produce 32,000 t/yr of copper and 26,000 t/yr of nickel over 26 years is a sweetener for BHP's copper division in Australia as well as its Nickel West unit. Nickel West is Australia's biggest nickel producer with output of 76,800t in 2021-22 and guidance of 80,000-90,000t for 2022-23.

BHP, which last year lost out to unlisted Wyloo Metals in a nickel-focused takeover bid for Canada's Noront Resources, is keen to bulk up its nickel assets in Australia and has acquired an interest in the Kabanga nickel project in Tanzania.

By Angus Macmillan