Anglo, Teck 'sticking together to survive'
Anglo American’s 'merger of equals' with Teck Resources will create a copper producer with 1.3-million tonnes a year of capacity, cementing its position as the world’s second-largest listed copper miner after BHP and, in the process, fending off potential suitors circling both companies.
London-based brokerage SP Angel said in a note on Tuesday the deal highlighted how the two miners were consolidating to sharpen their copper focus as investors demanded greater exposure to the metal.
“Seventeen months on from BHP’s approach, Anglo American has joined forces with Teck to create the second-largest listed copper miner globally after BHP,” SP Angel analysts said. They noted Anglo had already been simplifying its portfolio since rebuffing BHP, trimming assets through sales and divestments.
Teck, meanwhile, has struggled with operational challenges at its Quebrada Blanca mine, in Chile, contributing to a 21% share price drop over the past year, compared with a 31% gain in the global copper miners ETF.
“There is an element of sticking together to survive here, with Teck previously pursued by Glencore and supposedly both Vale and Rio, while the possibility of BHP coming back for another crack at Anglo had also been rumoured,” the analysts said.
The merger is targeting $800-million a year in synergies, with a further $1.4-billion a year in earnings before interest, taxes, depreciation and amortisation expected from integrating their adjacent Collahuasi and Quebrada Blanca operations in Chile.
SP Angel said the combined group was likely to press ahead with divestments of noncore assets. “De Beers separation plans are ongoing, alongside the sale of Anglo’s steelmaking coal and nickel divisions,” the analysts noted.
They added it was encouraging that Anglo Teck would keep its primary listing in London, while also expanding its footprint in Canada, South Africa and New York.
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