Miner M&A spotlight may shift to Teck and Freeport
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Karen Kwok
LONDON, June 27 (Reuters Breakingviews) -Mining bankers are all dressed up with nowhere to go. Now that BHP’s BHP.AX attempt to take over the non-South African parts of rival Anglo American AAL.L has hit the skids, the question is where the M&A spotlight is next going to fall in a sector newly buzzing with intrigue. The smart money right now seems to be on something involving Canada’s $25 billion Teck Resources TECKb.TO, or $72 billion New York-listed Freeport-McMoran FCX.N.
BHP’s Anglo interest, which petered out on May 29, has focused everyone’s minds on copper. Demand for the red metal is robust given its key role in the energy transition and an artificial intelligence-related data centre boom, but supplies are constrained. BHP boss Mike Henry’s three rebuffed takeover proposals for Anglo, the last of which valued the target at $47 billion, suggest big miners reckon it’s cheaper to buy new supplies than invest in new ones.
That said, it’s not immediately obvious who’s next on the block. Henry could wait the mandatory six months and have another pop at Anglo, but he’d still have to work out how to separate the UK-listed miner’s juicy copper mines from the other bits he doesn’t want. Anglo boss Duncan Wanblad, meanwhile, is unlikely to be an M&A aggressor — his successful defence against BHP requires him to spend the next year or so hiving off problem areas like diamonds. Rio Tinto RIO.L, RIO.AX, the other big global mining beast, was assumed to be waiting to pounce on other targets while BHP was distracted swallowing Anglo — which it now isn’t.
The picture doesn’t necessarily get any clearer in the next echelon down. Major copper-focused players include $26 billion Antofagasta ANTO.L, whose shares have doubled in the last two years, and $85 billion Southern Copper SCCO.N. These boast annual production of over 600,000 tonnes and 900,000 tonnes respectively. But Antofagasta is 65% owned by Chile’s Luksic family, which isn’t showing signs of selling, and Southern Copper is 90% held by Grupo México – led by Mexican tycoon Germán Larrea Mota-Velasco. Canada’s $11 billion First Quantum Minerals FM.TO had over 700,000 tonnes of annual copper output last year, but its Cobre Panamá mine in the Central American state has been embroiled in a spat with the domestic government.
Freeport, which is in contrast largely held by institutional investors, looks a more promising M&A candidate. CEO Kathleen Quirk, who took the reins this month, needs to find ways to make her equity story more exciting: analysts expect Freeport’s copper production to barely increase in the next five years at 1.3 million tonnes annually, according to estimates polled by Visible Alpha. She also recently conceded in a Financial Times interview that acquisition, while not her priority, was an effective way to boost copper output.
Teck is alluring for a starker reason. Boss Jonathan Price’s copper production could roughly double to nearly 600,000 tonnes by 2028, according to analysts estimates using Visible Alpha data, and Teck's 60% copper EBITDA margin forecast for 2025 exceeds Freeport’s 45%. While the Keevil family exerts an Antofagasta-style grip on the shareholder register, its special voting shares will flip to common stock in five years. After he completes the sale of Teck’s steelmaking coal business to Swiss rival Glencore GLEN.L, Price’s group will become a hugely attractive target.
The catch for interested parties is that this allure is substantially already in the prices of the more focused base metal players. Freeport’s shares have gained 360% in the past five years, compared to 17% for less copper-exposed Rio, BHP and Anglo. After deducting the earnings generated by coal, Teck is trading at 12.4 times the remaining EBITDA analysts estimate it to generate in 2024, using Visible Alpha data, with Southern Copper at 14.6 times and Freeport and Antofagasta at 7 times. Add a premium on top of that and Henry and his more diversified miner peers will be at severe risk of overpaying: BHP, Rio and Anglo trade on average at just 5 times, so the danger is they hand all the synergy benefits to their targets’ shareholders.
This doesn’t mean Teck and Freeport have no hope of being involved in big M&A. That’s because they could use their expensive shares to become acquirers. There are plenty of options. Teck’s $25 billion value gives it nearly the same market capitalisation as Antofagasta, while Vale’s base metal business was valued at a similar price when it sold a one-tenth stake to shareholders including Saudi Arabia last year. Price, or his counterparts at Freeport or Southern Copper, could use their equity to broker an all-share merger with one of this cohort.
Anglo and Glencore could be in play too. After spinning off its coal, diamond and platinum businesses, Anglo would be smaller, but more exposed to base metals. Value its $3.8 billion of estimated copper EBITDA in 2024 at the same level as pure metal players like Freeport, and it would be worth $27 billion. Wanblad may also feel the need to spin out his base metals business pre-emptively if he fails to deliver Anglo’s restructuring plan by 2025. Meanwhile, Glencore is trading at only 4.6 times 2024 EBITDA. If it decided to spin off its massive coal businesses, the likes of Freeport might fancy what’s left behind — analysts estimate Glencore's own copper business will generate $4.8 billion of EBITDA in 2024, implying a potential valuation nearing $35 billion on Freeport’s 7 times multiple.
It’s not impossible antitrust hurdles lie in the path of any Teck or Freeport M&A splurge. The Canadian government, after all, wasn’t overly welcoming towards Glencore’s bid for the entirety of Teck in 2023. Rather than engage in risky M&A, Teck or Freeport may yet prefer to spend resources on new technologies to squeeze more copper out of their own existing projects. Still, it wasn’t at all clear BHP would swoop for Anglo due to the complexity of the political backdrop, and it did so anyway. Copper watchers should stay tuned for further fireworks.
Follow @karenkkwok on X
CONTEXT NEWS
Freeport-McMoRan Chief Executive Kathleen Quirk said in a Financial Times interview published on June 17 that reducing the sector from scores of groups into a small number of giants could be an effective way to buoy supplies needed to cut emissions in the decades ahead.
Quirk took charge as chief executive of Freeport on June 11. Glencore's deal to buy Teck's coal mines is expected to close in the third quarter.
World's top 10 copper producers World's top 10 copper producers https://reut.rs/3VCNcBp
Global mining companies' market value https://reut.rs/4cduEPf
Editing by George Hay and Streisand Neto
免責聲明: XM Group提供線上交易平台的登入和執行服務，允許個人查看和/或使用網站所提供的內容，但不進行任何更改或擴展其服務和訪問權限，並受以下條款與條例約束：（i）條款與條例；（ii）風險提示；（iii）完全免責聲明。網站內部所提供的所有資訊，僅限於一般資訊用途。請注意，我們所有的線上交易平台內容並不構成，也不被視為進入金融市場交易的邀約或邀請 。金融市場交易會對您的投資帶來重大風險。
所有缐上交易平台所發佈的資料，僅適用於教育/資訊類用途，不包含也不應被視爲適用於金融、投資稅或交易相關諮詢和建議，或是交易價格紀錄，或是任何金融商品或非應邀途徑的金融相關優惠的交易邀約或邀請。
本網站的所有XM和第三方所提供的内容，包括意見、新聞、研究、分析、價格其他資訊和第三方網站鏈接，皆爲‘按原狀’，並作爲一般市場評論所提供，而非投資建議。請理解和接受，所有被歸類為投資研究範圍的相關内容，並非爲了促進投資研究獨立性，而根據法律要求所編寫，而是被視爲符合營銷傳播相關法律與法規所編寫的内容。請確保您已詳讀並完全理解我們的非獨立投資研究提示和風險提示資訊，相關詳情請點擊 這裡查看。
