Copper cobbers
A$9.6BN OZL ACQUISITION
Need To Know
- BHP to pay $28.25/share cash for OZL
- Big synergies and growth options in South Australian copper region
- Large nickel options in WA
BHP has increased its offer to acquire all of OZL for $28.25 per share in cash, less any dividend OZL may pay prior to deal completion.
The combination of OZL and BHP brings together like-minded strategies on ‘future facing minerals’, particularly copper and nickel.
BHP will conduct four weeks of exclusive due diligence and will also require the unanimous approval of the OZL Board among other usual requirements.
Investment Implications
BHP’s copper and nickel operations and resources dwarf those of OZL, but there is a geographic and strategic empathy that makes this a compelling deal for BHP. Ever since BHP acquired WMC Resources for A$9 billion in 2005, it has sought ways of expanding the Olympic Dam (OD) mine, the world’s fourth largest orebody at the time. A 2011 plan to invest US$30 billion to increase production from 600ktpa copper to 2.4mtpa (along with more uranium, gold and silver) didn’t eventuate although it got very close.
OD remains a mercurial monster for BHP so the possibility that bringing the OZL mines (Carrapateena and Prominent Hill) under a single South Australian copper region might just be the catalyst to unlock the vast resource at OD.
Globally, BHP produced ~1.5mt of copper in FY22 compared to OZL’s 125kt in FY21 (year ending 31 December 2021).
BHP’s net operating assets in copper in FY22 were US$27.4 billion (Group total assets US$95.1 billion) compared to OZL’s group assets at A$5.5 billion as at 30 June 2022.
Both companies have substantial plans to expand existing and future operations in copper and nickel as these elements are seen as crucial to the global decarbonisation trend. This is especially true for electric vehicle battery manufacture that requires substantial quantities (~55kg) of copper per vehicle.
The acquisition may not move the earnings dial for BHP, but strategically we see this as a very clever acquisition if the bigger picture on Olympic Dam emerges.
Perhaps the wasted decades of progress at OD have fortuitously left all that valuable copper until the world needs it more than ever.
Figure 1: BHP group copper production
Stock overview
Share Price
Company overview
BHP Group is a global commodities producer including iron ore, metallurgical coal, copper, gold, silver, uranium oxide, lead, zinc, cobalt, molybdenum, manganese, and potash.
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