To close the supply deficit in critical minerals such as copper, an estimated 270GW in new low-carbon power capacity, 350,000 new jobs and $4.7-trillion in capital would be required in the next decade. Of this capital outlay, an estimated $260bn is required every year for new projects, calculates McKinsey & Co.
Mining companies are struggling to meet the challenge. Instead of spending more, they have cut expenditure. Greenfields exploration declined by 6% in 2024 to $12.5bn, according to S&P Capital IQ. Tighter monetary policies and weaker commodity markets have been blamed. In order to grow production, mining firms turn to deals instead.
The argument for mergers & acquisitions (M&A) is that they can bring scale, improve liquidity and attract new investment, especially among generalist funds. This will lower the cost of capital and make new projects cheaper to build. Compared with the world’s tech giants, mining firms are minnows. Despite producing the minerals crucial to data centres, miners struggle to command eyeballs outside their niche. BHP Group, the world’s largest miner, is worth $135bn, whereas chipmaker Nvidia is capitalised on the Nasdaq at nearly $4.5-trillion.
These are among the factors that drove BHP to revisit a bid for Anglo American, itself closing in on a $50bn merger with Canadian firm Teck Resources. Anglo has 700,000t of copper production, with the potential to increase to 1Mt a year through brownfields expansions. The logic is well received: bolt-on acquisition is a quicker way to market dominance than building production, which can take a generation and is more costly.
One reason BHP failed in its new bid for Anglo is that shareholders liked the clearer industrial logic of the Teck deal
But one can’t shake a suspicion that BHP was acting desperately. It had already been rebuffed by Anglo in 2024. That attempt was highly conditional and transferred too much risk to Anglo shareholders. BHP’s new offer included cash but came with many of the same problems, including antitrust issues that would have forced BHP to slough off assets such as iron ore, thus defeating the argument of dealing for scale.
BHP CEO Mike Henry is expected to step down next year, ending five years in the post during which he has failed to add any substantial M&A. Ironically, where he has succeeded is in rationalising (rather than growing) its portfolio and simplifying the business by removing an unwieldy dual-listed structure. In the wake of BHP’s first failed bid for Anglo, he also rolled out a copper project programme.
For Anglo, BHP’s failure ends interloper risk, clearing the way for its merger with Teck, assuming shareholders support it in a December 9 vote and the Canadian government gives its blessing, which is no simple matter. One reason BHP failed in its new bid for Anglo is that shareholders liked the clearer industrial logic of the Teck deal. Shares in Anglo are 31% higher over the past six months; BHP is up just 6%. The message is clear: M&A for scale alone is unattractive, especially when it’s complex.
As for remedying the world’s minerals deficit, that job is falling to sovereign or direct government investment. In October, UK fund Orion Resource Partners signed a $1.8bn deal with the US and Abu Dhabi governments to invest in new production. Orion managing partner Michael Barton says the firm has always had sovereign investment, but increasingly state funds want to do more bespoke work, largely for reasons of national security. The task of minerals supply is no longer just the remit of the boardroom.
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