MELBOURNE/LONDON BHP Group bid US$38.8 billion for Anglo American on Thursday, offering a deal to forge the world's biggest copper miner and driving its smaller rival's shares 13% higher.

Mining's latest move to consolidate is driven by a scramble for copper and other metals central to the world's clean energy shift and could have major repercussions for South Africa, which has seen the platinum it mines fall out of favour.

BHP said it will offer Anglo's shareholders 25.08 pounds (US$31.39) per share, a premium of 31%, and spin out its London-listed target's iron ore and platinum assets in South Africa, where BHP, the world's largest listed miner, has no activities.

Anglo, which owns mines in countries including Chile, South Africa, Brazil and Australia, said its board was reviewing BHP's unsolicited, non-binding and highly conditional proposal. Under UK takeover rules, BHP has until May 22 to make a firm offer.

Several shareholders in Anglo expressed concern about BHP's move, with Legal & General Investment Management calling it "highly opportunistic" and "unattractive". Redwheel said details of the proposal were "rather sketchy", adding that the offer could spur further interest in the takeover target.

Shares in Anglo were up 13.3% at 24.98 pounds at 1305 GMT.

A deal would create a group with around 10% of the global output of copper and could also trigger further consolidation in the sector. Mining has seen a rush of mergers and acquisitions as companies attempt to raise their exposure to metals seen as critical to the global energy transition.

"There is so much to unpick and there will be concerns about the extent of the concentration in the copper industry," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

The bid comes after Anglo, which had a market value of US$37.7 billion at Wednesday's close, began a review of its assets in February in response to a 94% fall in annual profit and a series of writedowns due to a drop in demand for most of its metals.

BHP, best-known for mining iron ore, copper, coking coal, potash and nickel, was valued at about US$149 billion.

An Anglo deal would be the second major acquisition by BHP in about a year after its 2023 purchase of copper miner Oz Minerals. Its bid adds to a frenzy of global M&A activity, including gold giant Newmont's US$16.8 billion buyout of Australia-based Newcrest Mining late last year.

"It's a good deal for BHP. Anglo is obviously very much in play now and there's probably room for others to interlope. This is going to set the whole sector on fire," said Ben Cleary, portfolio manager at Tribeca Investment Partners, which holds shares in both companies.

A takeover of Anglo would likely be among the 10 biggest-ever mining deals by value and could involve delisting Anglo from the London market, a potential blow to an exchange that is struggling to retain big companies and attract IPOs.

Some said BHP would need to offer more to get a deal done.

"There is ... almost no way ... that the premium being offered by BHP is going to be enough to entice Anglo management to transact," said Mark Kelly of advisory firm MKP.

South Africa's Public Investment Corporation (PIC), which holds 6.99% of Anglo American according to LSEG data, said it would assess any offer "to ensure value creation".

"The mining sector remains a critical part of the South African economy, impacting a wide variety of stakeholders, therefore, new opportunities that may arise in the sector need to take these factors and long-term sustainability into account," it added in a statement.

Copper

BHP would gain more copper and potash, which are its key strategic commodities, and more coking coal in Australia.

Anglo has copper mines in Chile and Peru, where BHP also has operations, and their combined output would amount to around 2.6 million metric tons a year, pushing it well ahead of U.S.-based Freeport-McMoRan and Chilean state miner Codelco.

Developments such as artificial intelligence and automation - and the energy transition, which includes electric vehicles and renewable energy - have driven up demand prospects for copper cable used to conduct electricity.

Copper prices on the London Metal Exchange have surged 15% this year on expectations of higher demand given encouraging economic data, US rate cut bets, speculative trading and supply bottlenecks driven by the December shutdown of one of the world's largest open-pit copper mines.

BHP is targeting copper production of between 1.7 million and 1.9 million tons for the 12 months ending in June, while Anglo's 2024 production guidance is 730,000 to 790,000 tons.

Diamonds

A condition of BHP's proposal is that Anglo first distributes its stakes in Anglo American Platinum and Kumba Iron Ore to shareholders.

Anglo's holdings in the platinum and iron ore miners are worth US$7.44 billion and US$5.4 billion respectively, according to LSEG data based on Wednesday's close of trade.

It also owns 85% of diamond giant De Beers and BHP said its other high quality operations, including diamonds, would undergo a strategic review after a deal was done.

South Africa's biggest mining investors are halting new projects in response to a slump in profits due to local challenges and weakening prices of commodities such as platinum.

Meanwhile, the coking coal assets of the two miners, both in Australia's Queensland, could come under regulatory scrutiny given a deal would merge two of the biggest producers in the global seaborne market.

  - Reuters