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Since it is easier to buy mines than endure the pain of building them in remote parts of the planet, bidding wars often break out for mining companies that come into play. A few of them, such as the global free-for-all for Canada’s Falconbridge and Inco nickel producers about 18 years ago, turn into epically long, expensive, nasty – and entertaining – exercises in subterfuge and hubris.

Now it’s Anglo American’s turn on the auction block. But don’t count on a global fight for this company, for Anglo is no easy target – even for BHP, the mining powerhouse that covets it most.

Anglo, one of the Big Five mining houses – the others are BHP, Rio Tinto, Glencore and Vale – was effectively pushed onto the market almost three weeks ago when BHP revealed a US$39-billion takeover proposal for the London-listed company. The move triggered speculation that a flurry of rival bids were inevitable, since one of Anglo’s main commodities, copper, is the new gold dream. Control copper reserves and you control the transition to the clean economy, because the metal is an essential ingredient for everything from wind turbines to batteries.

So far, a whole bunch of nothing has happened, though all the industry heavyweights are certainly mulling their options – or lack thereof. It is their fiduciary duty to do so.

Rio Tinto has hired Wall Street’s JPMorgan for advice. Typically pugnacious Glencore is probably plotting mischief of some sort. The only near-certainty at this stage of the game is that BHP will raise its bid for Anglo, since Anglo summarily dismissed the opening pitch as mean.

There’s a fair chance that rival mining companies, popcorn in hands, will simply take pleasure in watching BHP torture itself trying to win Anglo and devising plans to absorb the relatively few parts of its quarry that it wants to keep. The whole exercise is fraught with risk and could backfire if BHP emerges as the victor only to find itself unloading Anglo’s bits and pieces at a discount. In a note published this week, Angus Aitken of Aitken Mount Capital Partners, a boutique investment firm in Australia, said, “In our view, this deal really does have the potential to be a complete mess for BHP long term.”

Anglo’s copper-to-diamonds diversity, its South African exposure and recent production problems make it a complicated beast that investors have not loved in recent years. BHP’s all-share bid, which was pitched at a 31-per-cent premium, is equally complicated. The offer, which has yet to be made formal, is conditional upon Anglo spinning off its control stakes in two South African companies, Anglo American Platinum (Amplats) and Kumba Iron Ore. Both are listed in Johannesburg, and the stakes have a combined equity value of about US$13-billion.

But an Anglo shorn of Amplats and Kumba would not be slim enough to satisfy BHP. More assets would be shown the door. BHP mostly wants Anglo’s thriving copper interests in Peru and Chile, among them the massive, long-life Collahuasi mine, which it co-owns with Glencore, and the iron-ore operations in Brazil. The big question is whether it will have to unload the other assets at deep-discount prices. It could.

Take Anglo’s De Beers diamond company. BHP has no interest in diamonds and would surely sell it. While De Beers has a fine global brand anchored by the unforgettable “A Diamond is Forever” line, it would not be an easy sale, since much of its production is in Africa, a big negative for some mining companies that equate the continent with instability. The company generates scant free-cash flow and faces a competitive threat from synthetic diamonds. Alrosa, the Russian diamond giant, would be a logical contender, but the sanctions against Russian diamonds would prevent it from bidding.

Another difficult sale would be Anglo’s enormous Woodsmith project in England, which sits on the world’s biggest known reserves of polyhalite fertilizer. Last year Anglo took a US$1.7-billion write-down on the delayed, overbudget mine, to which analysts ascribe little value. BHP, through its Jansen potash project in Saskatchewan, is keen on fertilizer, but the word on the street is that it would have zero interest in funding Woodsmith to completion. Given its problems, Woodsmith might have trouble generating any interest even among bargain hunters.

Ditto several other Anglo assets. Anglo has two ferro-nickel sites in Brazil. But nickel is no longer a hot commodity because the market is glutted with Chinese-controlled production in Indonesia. That business may not fetch a high price. BHP likes metallurgical coal, but its biggest coal mines are open-pit, not underground, like Anglo’s, so few synergies would arise from combining the two. Anglo’s coal, too, may be sold, but not many buyers other than Glencore are keen to boost their exposure to the climate-unfriendly fuel.

BHP’s premium for Anglo, which will no doubt get jacked up in an effort to win over Anglo’s directors and investors, probably reflects its belief that the Anglo assets it would put on the auction block will fetch a high price. That may be wishful thinking. Who is going to pay a premium for diamonds, nickel and coal? If those assets get sold cheaply, BHP’s effective purchase price of Anglo would rise. In other words, the true price for Anglo may not be known for years. Strange way to buy a company, full of risks.

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