BHP's Spinoff South32 Eyes Anglo American's Manganese Assets in $5B Strategy

Key Takeaway

• South32 is eyeing Anglo American's manganese assets, aligning with its $5 billion investment strategy in copper and zinc projects.
• The potential acquisition would solidify South32's position as the world's largest manganese producer, crucial for steel production.
• BHP Group has until May 29 to submit a binding offer for Anglo American, moving closer to a $49 billion takeover.

South32's Strategic Moves

South32 Ltd, a diversified mining company spun out of BHP Group Ltd in 2015, has expressed interest in acquiring Anglo American's share of their jointly owned manganese assets. CEO Graham Kerr emphasized the strategic fit and readiness to expand by investing $5 billion in copper and zinc projects. "At the right price, absolutely. We know them better than anyone else," Kerr stated, highlighting the company's familiarity with these operations and strategic interest in bolstering their portfolio.

Headquartered in Perth, Australia, South32 is the world's largest producer of manganese, a critical steel hardening additive. The company operates major manganese mines at the GEMCO facility in Australia's Northern Territory and South Africa's Kalahari Basin. These operations are central to South32’s strategy as it seeks to expand its influence in the global metals market. Kerr mentioned that South32 has around $5 billion earmarked for acquisitions, particularly targeting new copper and zinc projects to diversify its asset base further. He told Reuters that ideally, South32 would acquire “another operation in copper and zinc and another shovel-ready project,” potentially including increased exposure to Southern Africa.

Portfolio Reshaping

South32 has been actively reshaping its portfolio, recently agreeing to sell its Illawarra metallurgical coal business for $1.65 billion to focus on copper and zinc. Kerr noted the company’s exit from fossil fuels has attracted interest from new investors, particularly European and Australian funds. This strategic shift aligns with the company's broader goal of diversifying its asset base and reducing its reliance on fossil fuels.

The potential divestiture of Anglo American's manganese assets to South32 could align with its restructuring efforts and BHP's plans after an eventual takeover. With BHP potentially acquiring Anglo, South32 sees an opportunity to strengthen its position as a leading supplier of manganese — a crucial component in steel production whose demand is rising alongside the growing battery metals sector. By acquiring Anglo’s stake, South32 would solidify its foothold in this critical market.

BHP's Acquisition Efforts

BHP Group, the world's largest miner, has been granted a one-week extension to submit a binding offer for Anglo American, giving them until May 29. BHP is expected to focus on addressing Anglo’s concerns around “completion and execution risks” over the coming week, according to sources. Shareholders in BHP Group see the company moving one step closer to a $49 billion takeover, after Anglo American Plc rejected a third approach but agreed to talks and granted its suitor an extra week to commit to a binding bid.

“As a deadline approached on Wednesday, BHP again sweetened its all-share proposal — but stopped short of altering a structure that would oblige the target to spin off its South African iron ore and platinum businesses before the remainder is bought up,” said Prasad Patkar, head of qualitative investments at Platypus Asset Management in Sydney, which owns BHP stock. “At a price, Anglo is a seller, and at any price, BHP is a buyer. So I think that deal will get done.”

Management Quotes

• Graham Kerr, CEO of South32:

  "At the right price, absolutely. We know them better than anyone else."
  "Another operation in copper and zinc and another shovel-ready project."