Deliberations are at an early stage and there’s no certainty that BHP will decide to proceed with a deal, the people said. Representatives for BHP declined to comment.

A deal for Anglo American would likely rank as the world’s biggest takeover globally this year, surpassing Capital One Financial’s $US35 billion acquisition of Discover Financial Services, according to data compiled by Bloomberg.

It would also represent the first mega deal among the world’s biggest diversified miners in over a decade. BHP and its biggest rivals spent years on the sidelines after a series of disastrous transactions, but have warmed up to the prospect of dealmaking after reassuring investors that they have learned from past mistakes.

BHP last year bought copper producer Oz Minerals for about $9.6 billion in its first major purchase in years, but has until now focused on selling assets such as oil, gas and coal.

While Anglo’s valuation may make it more attractive, it remains a highly complicated business.

The company owns majority stakes in two South African-listed miners — Anglo American Platinum and Kumba Iron Ore — and is the majority owner of diamond miner De Beers. It also has a long and complicated relationship with South Africa, where the state pension fund manager is its biggest shareholder.

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Anglo said BHP’s proposal was to first hand Anglo’s stakes in the two South African businesses to Anglo’s shareholders before proceeding with a takeover. The two parts of the proposal would be interconditional, it said.

Anglo’s other operations include copper, nickel, steelmaking coal and Brazilian iron ore.

For BHP, the lure for any deal would be Anglo’s copper business. The world’s biggest miners are all seeking to expand their copper production in anticipation of rising prices as demand for electrification rises while future supplies look constrained.

Anglo’s South American copper business has long been sought after by bigger players in the industry, although it has recently faced setbacks and had to reduce its copper production forecasts.

A bid for the whole of Anglo American would likely raise antitrust issues in several of the company’s key markets, while Anglo’s production of platinum-group metals and diamonds doesn’t present an obvious fit with BHP’s strategy or commodity mix.

Bloomberg

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