The Gulf has solid reasons to intervene in BHP’s bid for Anglo

Reuters/Philimon Bulawayo

In the era of energy transition, the mining industry has become the most strategically important sector of the global economy.

I’ve written before about the shift from Big Oil to Big Shovel as we search for the metals and rare minerals – copper, iron ore and lithium, among others – that are essential to the expansion of electrification to reduce greenhouse gas emissions.

The Middle East – the UAE and Saudi Arabia in particular – have recognised the importance of this shift and looked to exploit it via huge government-backed initiatives.

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Saudi Arabia is looking to exploit what it believes are $2.5 trillion worth of mineral riches beneath its land, as well as buying mining operations abroad. The UAE has been snapping up international mining and mineral assets, notably in Africa.

Now – according to informed speculation among Gulf investment bankers – they are eyeing up the best opportunity yet to break into the global mining industry: by becoming involved in the increasingly tortuous takeover battle between BHP of Australia and Anglo American, a UK-listed miner going through tough times.

I have no idea if the mutterings coming from Riyadh and Abu Dhabi will come to anything, but there is a persuasive logic to the notion of an Arabian “white knight” riding to the rescue of Anglo – and in the process making itself a force in the global mining industry.

A little background: Anglo began life 107 years ago as a gold miner in South Africa. It still does big business in the country, in platinum as well as gold, despite diversifying globally into other minerals, especially copper.

Last month BHP, an even older miner based in Melbourne and listed on the Australian Securities Exchange, made an all-share offer for Anglo worth $39 billion – but received an immediate rejection from the board.

Members did not like the price (too low), the deal structure (too complicated) and the South African considerations (too political).

There is a persuasive logic to the notion of an Arabian ‘white knight’ riding to the rescue – and in the process making itself a force in global mining

A revised offer by BHP – valuing Anglo at $42 billion – was submitted today and also rejected. It is turning more hostile by the day. 

Meanwhile, global competitors such as Rio Tinto and Glencore are reportedly considering rival bids to thwart BHP.

The talk in the Gulf is that a straightforward cash bid from a wealth fund would cut through shareholder objections – and also be more acceptable to the South African regulators who will have a big say in how the deal proceeds.

A minimum price tag of $39 billion is high, even for a Gulf wealth fund. But in both Saudi Arabia and the UAE there are entities that have identified mining as a global priority and may be prepared to splash out on what can be regarded as a strategic opportunity that will not come up again any time soon.

An interesting subplot involves the Anglo subsidiary De Beers. The diamond miner and marketer is facing its own tough times as prices come under pressure from synthetic jewels and changing consumer tastes.

Anglo had already made noises about selling its illustrious offshoot, but the BHP bid cracked the rumours open again. The Wall Street Journal reported that international luxury groups and Gulf wealth funds were among those showing an interest in De Beers.

Valuing De Beers is difficult, not least because of a slump in profitability in 2023 that prompted a $1.56 billion reduction in book value by Anglo. A bid in the low single-digit billions would almost certainly be enough to secure it, according to the diamond trade analysts at Rapaport.

Gulf investors may be tempted by the sparkle of De Beers, but in terms of strategic advantage in the era of Big Shovel, Anglo would be a more fitting target.

The energy transition, in which the Arabian Gulf has serious ambitions to leadership, needs copper, iron, platinum and iron more than it needs “a girl’s best friend”.

Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He acts as a consultant to the Ministry of Energy of Saudi Arabia and is a media adviser to First Abu Dhabi Bank of the UAE