Anglo American to Invest $200 Billion in Copper, Iron Ore Transition

Anglo American, a leading mining conglomerate, is set to invest 200 billion dollars to accelerate its transition into copper and iron ore mining. This strategic shift comes as the global energy transition gains momentum, making copper a highly sought-after commodity in the metal market. The company is reportedly close to acquiring Canadian mining company Teck Resources, with the deal valued at approximately 200 billion dollars, primarily in stock.

Teck Resources, with a market value of approximately 170 billion dollars, primarily focuses on copper, zinc, and refined zinc. The company projects that its copper production will reach 525,000 metric tons by 2025, which is 70% more than Anglo American's estimated copper output for the same period. Additionally, Teck Resources plans to significantly expand its copper mining operations by 2030.

Anglo American's subsidiary, De Beers, is the world's second-largest diamond producer. However, a sluggish diamond market has led to significant losses, prompting the company to consider divesting its diamond business. Last year, BHP attempted to acquire Anglo American for 390 billion dollars, but the offer was rejected. The interest from competitors has underscored the urgency for Anglo American to expedite its transformation.

Anglo American is also grappling with how to divest its coal and diamond businesses, which have become "hot potatoes." Last year, Peabody Energy expressed interest in acquiring Anglo American's coal business for 33 billion dollars. However, an explosion at Anglo American's Moranbah North coal mine last month caused Peabody to withdraw from the negotiations.

Regarding De Beers, Anglo American is pursuing a "two-pronged" strategy: if no buyer is found, the company will list it on the stock exchange. However, the President of Botswana, where De Beers has significant operations, has expressed interest in acquiring the company to achieve self-sufficiency in diamond production. The Botswana government holds a 15% stake in De Beers and has a long-term supply agreement with the company through a joint venture, Debswana. However, Botswana's foreign exchange reserves are only 35 billion dollars, making it challenging to meet Anglo American's expected price of 49 billion dollars for De Beers.

Industry experts have differing opinions on the matter. Some analysts suggest that 10 billion dollars would be a good price, while others argue that Anglo American should not sell De Beers at a low price during a downturn in the diamond industry and should wait for two more years. The company's strategic shift towards copper and iron ore mining reflects its commitment to adapting to the changing global energy landscape and capitalizing on the growing demand for these critical metals.