Mining mergers are rarely elegant affairs, but Anglo American PLC's (LSE:AAL) proposed all-share combination with Canada’s Teck Resources Ltd (USA) (TSX:TCK) is about as close to a “merger of equals” as this industry ever gets.
The $55 billion group that emerges will be one of the world’s five biggest copper producers, a metal increasingly seen as the backbone of the energy transition.
The numbers are chunky. Anglo shareholders will own 63% of the new company, to be listed in London, Johannesburg, Toronto and New York.
The head office will sit in Canada, but it is Anglo’s chief executive and finance chief who will take the same roles at the combined group. Teck’s boss is in line for the deputy job.
The new entity will boast copper output of 1.2 million tonnes a year, with scope to rise to 1.35 million by 2027.
Investment banks have been quick to cheer. Citi talks of $800 million in cost savings. JP Morgan reckons that if everything goes to plan at the big Chilean mines Collahuasi and Quebrada Blanca, the synergies could run to $1.4 billion.
That would make the deal 15% more profitable for Anglo shareholders by 2027, and 20% by 2030.
Investors like what they see: Anglo shares jumped 9% on the announcement, Teck’s by 11%. At current values, the pair leapfrog Glencore to become London’s second-largest listed miner.
Copper’s attractions are obvious. It is needed in everything from electric vehicles to wind turbines, and supply is tight. By deepening its exposure, Anglo is betting that the green transition will provide steadier rewards than its more volatile diamond or platinum divisions.
Mining deals often disappoint in practice, but for now, the City seems convinced. A bigger, copper-heavy Anglo Teck looks well placed to ride the next decade’s demand.