London-listed Anglo-American has unveiled a “clear, compelling, and decisive plan to unlock significant value from its portfolio.” This strategy involves selling its platinum and diamond business units while concentrating on copper, positioning itself to prosper off the ‘Next AI Trade’ as data centers and power grids will use an enormous amount of the base metal to ‘power up’ the digital economy. Also, it’s a move to thwart a hostile takeover attempt from BHP Group.
Anglo was forced to radically transform itself into a copper giant because of BHP’s twice-rejected takeover bid, now worth £34 billion ($43 billion). The move also responds to shareholder pressure to focus on copper assets and demerge its stakes in less profitable ones, such as its steelmaking unit, coal business, Anglo American Platinum, and De Beers (diamonds).
Anglo Chief Executive Officer Duncan Wanblad’s major overhaul aims to replicate rival BHP CEO Mike Henry’s proposed idea of transforming Anglo into one of the world’s biggest copper giants.
Financial Review noted that Wanblad plans to wait until after the South African elections on May 29 before announcing his complete restructuring of the company, which will need South African government approval for a demerger of its platinum and diamond mines.
“The only thing the BHP bid [did] was force the timeline on work we were already doing,” Wanblad said on a call at 0300 ET. He will present the overhaul plan at the Bank of America Global Metals, Mining & Steel Conference in Miami, Florida, today.
He continued, “I would probably not have announced this at this particular point in time, it would have been just a little bit later … I would have been much more sensitive in terms of the stakeholder management of this, but I now have no option.”
In markets, Anglo shares in London slipped by 3%, while BHP’s shares increased by 3%, reflecting the market’s perception of a reduced takeover probability.
“The outcome of Anglo’s strategic review will not have changed BHP’s plans, but they are probably actively assessing where they are now in light of this,” said Lachlan Shaw, an analyst from UBS Group AG.
Joshua Mahoney, chief markets analyst at Scope Markets, wrote in a note, “The decision to spin off their diamond, platinum, and coal mining operations will see a greater focus on copper.”
Mahoney said, “With copper rising into a fresh two-year high this morning, there is a clear surge in demand for this key material as the world progressively moves towards increased electrification.”
Concentrating on copper assets is the correct move for Anglo, as Goldman’s Nicholas Snowdon penned in a note last week for clients that metal market is “moving into extreme tightness.”
Last month, being uber-bullish on copper, Snowdon wrote, “Copper’s time is now“ (available to pro subscribers in the usual place)…
Separately, Bank of America’s commodity desk jumped on the copper trade, warning that a “supply crisis is here.”
In December, billionaire mining investor Robert Friedland explained to Bloomberg TV in an interview that copper prices are set to soar because the mining industry is failing to increase supply ahead of ‘accelerating demand.’ He warned:
“We’re heading for a train wreck here.”
As we’ve noted in “The Next AI Trade” & “Everyone Is Piling Into The “Next AI Trade””, as well as “The “Next AI Trade” Just Hit An All Time High,” – data center demand and powering up America will need copious amounts of copper, at a time when mining supplies are dwindling. We all know what that means for price.
Tyler Durden
Tue, 05/14/2024 – 07:45
