Over the last couple of years or so, BHP Billiton has had one goal: Increase exposure to “future-facing commodities”. These are crucial commodities needed to make the green energy transition and future technologies like artificial intelligence (AI) happen. Copper is arguably the most important commodity of them all. And the demand for the metal to build electric vehicles (EVs), solar panels, data centres and high-voltage cables is booming.

So much so, that copper supply is expected to hit a serious deficit in the coming years.

In fact, according to CRU Group, copper miners need to spend more than $150 billion between 2025 and 2032 to fulfil the industry’s supply needs.

While last year, BHP’s CEO Mike Henry said the investment shortfall in new copper mines is more than $300 billion.

That’s why, BHP forked out $6.4 million to acquire Australian copper producer Oz Minerals in 2023.

Now, the company’s set its eyes on the next big copper target…

Why BHP’s targeting Anglo’s copper commodity assets

It’s simple…

Anglo American owns extraordinary copper assets in Peru and Chile. However, the mining giant has struggled to increase copper production.

The company already lowered its 2024 copper forecast by 7% due to curtailments at its Chilean operations.

In addition, Anglo is opportunity rich (stellar mining assets), but cash poor. In other words, they don’t have the ability to invest and develop their copper opportunities in South America.

On the other hand, BHP boasts solid a free cash flow and balance sheet. For them, the acquisition makes sense. It provides a unique opportunity to develop Anglo’s coppers assets fast enough to secure future supply.

BHP already owns a majority slice of Escondida – one of the world’s biggest copper mines, which isn’t far from two of Anglo huge operations in Chile.

In terms of production BHP produced approximately 1.3mt of copper in 2023, while Anglo American’s output stood at 0.83mt.

So, if this deal was ever realised, it would see BHP emerge as the world’s biggest copper producer, accounting for around 10% of global mined supply.

Of course, we know that the initial $39 billion bid was rejected by Anglo. And I’m sure a second bid is likely.

If it’s successful, the deal may run into some issues such as competition and anti-trust. After all, the combined forces of BHP and Anglo American would result in significant market dominance in the copper sector.

Remember back in 2008, BHP attempted a $60 billion offer to acquire Rio Tinto. That deal never got across the line after being knocked back twice by competition regulators across the globe.

While we await to see what BHP’s next course of action will be, what’s clear is…

The world is in DESPERATE need of new copper supply.

The problem is high-quality deposits are getting harder to find. Funding for small explorers is almost non-existent. And the cost of labour, equipment and raw materials has surged.

In addition, to incentivise miners to produce, copper prices need to rise. Blackrock recently put that copper price at $13,000. Meanwhile, billionaire mining giant Robert Friedland says copper needs to rise to $15,000.

Recently, copper prices already smashed past the $10,000 mark. To reach the targets above, copper prices still need to rise around 30%-50% higher.

That will be a boon for some copper miners.

At the end of the day, if the world wants clean energy solutions, EVs, data centre, etc etc, we’re going to need copper.

As investors, we don’t need to own BHP to make good money from the great copper supply disruption. In fact, there’s a little JSE stock that could be sitting on more than R500 billion worth of copper! And it could make investors amazing profits in the coming years. You can find the ticker symbol buy price and complete analysis on this little stock in the latest issue of Red Hot Penny Shares out now.

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