The last time BHP Group took a swing at another major miner, it was Rio Tinto back in 2007. That could have been a blockbuster $150-billion takeover, but with metals prices crashing as the financial crisis took hold and with China signaling its discontent, the plan crumbled.

Having confirmed its takeover approach for rival Anglo American on Thursday, executives at the world’s biggest digger will be hoping for a better outcome this time — even with one of the most complex deals the industry has seen in years.

The sector as a whole has a dismal track record when it comes to acquisitions. Caught out by the scale of China’s economic acceleration at the start of the century and desperate to add supply, mining giants went on a shopping spree. The result was that billions of shareholder dollars were incinerated through poor purchases and investments in often overly ambitious, large-scale projects.

BHP is no exception. It failed in a $39-billion pursuit of Potash Corp. of Saskatchewan Inc. It did pull off the $12.1-billion purchase of Petrohawk Energy in 2011 — but the move into shale proved to be an expensive mistake. It resulted in the early exit of CEO Marius Kloppers, and BHP ultimately cut its losses and sold out to BP in 2018.

BHP retreated into its role as a conservative heavyweight and flagship Australian company, focusing on cleaning up the consequences of the splurge. It appointed appropriately technocratic leaders and sold assets rather than buying them, spinning off what became South32 in 2015. It only began testing the acquisition waters again in 2022, securing the $6.4-billion purchase of copper producer OZ Minerals.

“The large deals in the past have been hard to deliver, hard to show how they add value. In a number of cases, you roll forward a couple of years and deals are unwound,” said David Radclyffe, managing director at Global Mining Research in Sydney.

“So given that this deal is a complex structure, with complex geographies, and a complex commodity mix — it appears that the real opportunity is copper, BHP just has to take all the rest and deal with that as it can — it does raise a few flags.”

DIGGING DEEP

Eager to cherry-pick the best of Anglo American’s assets outside South Africa and to seize copper assets before the metal’s price really takes off, BHP is betting on an unusually byzantine structure. Its $39 billion all-share offer is dependent on spinning off Anglo American Platinum and Kumba Iron Ore, and it has already said assets beyond copper, metallurgical coal and iron ore would be “subject to strategic review.”

Pulling off such a deal will be tricky.

Buyers for businesses like diamond arm De Beers are not plentiful, and that’s before considering the additional challenge of navigating any sales demanded by global antitrust authorities, as China and other major jurisdictions consider the impact of allowing BHP to become the world’s largest copper producer.

Even when such deals do work, the fallout can be dud assets that weigh on the balance sheet for years. BHP’s 2001 purchase of Billiton — the deal that created today’s miner — took years to clean up.

In large part, the willingness to take on such a drawn out and risky bid is in itself a reflection of the lack of options for miners eager to expand out of steelmaking commodities — which have underpinned profitability for years — and into the ingredients of a green energy transition. That includes many metals where scale is simply too small, and others where there are simply too few assets available to buy — including copper.

“If you want to get half a million tons of copper capacity in the market today, maybe you have to buy things that you don’t necessarily want, to be able to extract out that particular part of the business,” GMR’s Radclyffe said.

If share prices are a guide, BHP’s probably going to have to pay more to win over Anglo. That will add another layer of complexity, and test the balance between paying enough to capture its quarry and not so much as to rattle shareholders with long memories.

“BHP can probably pull this off this time because at least it is the right time in the cycle,” said Matthew Langsford, portfolio manager at Sydney-based Terra Capital, who is interested in copper but isn’t a shareholder in BHP or Anglo American. “We are a long way from large new copper supply coming to market and inventories are low.”