RE: AFR Article - Newcrest / Havieron + Solgold21 Aug 2022 09:21
SOLG not mentionned, but should be there in big fat lettets.......
Garimpeiro doubts BHP (ASX:BHP) chief executive Mike Henry takes much notice of his mumblings. But you’ve got to wonder.
Just three weeks after Garimpeiro mentioned that the copper stocks were over-sold, Henry lobbed an $8.3 billion takeover bid for OZ Minerals (ASX:OZL).
The spurned offer was a pitched at $25 a share – a 32% premium to OZ’s share price on the day of the offer (August 5).
That allowed BHP to present the offer as being generous. OZ has other ideas, with BHP now having to decide to increase the offer or walk away.
Whatever the outcome, BHP’s initial attempt to snatch OZ was opportunistic in the extreme.
It sought to take advantage of the over-sold situation in copper stocks in response to earlier general equity markets weakness due to global interest rates/economy fears, and the accompanying commodity price retreat.
Copper fell to low as $US3.17/lb in mid-July. That was down from the FY2022 average of $US4.37/lb. So copper stocks like OZ should have been feeling some pain.
But the pain was over-done, leading to Garimpeiro’s call at the time that the copper price was set to rally, and that copper stocks would bounce back. The argument was that copper’s key role in global decarbonisation had not gone away and if anything, it was accelerating.
Copper has since rallied to $US3.61/lb and there has been no better confirmation that the copper stocks had been over-sold than BHP’s attempt to snare OZ for a 32% day one premium or $8.3 billion (OZ is now trading well ahead of the bid price in anticipation of a higher offer).
Copper price year-to-date.
BHP is a super bull on copper’s outlook.
Apart from the OZ tilt, this week’s commodity outlook report accompanying BHP’s FY2022 said as much.
BHP said a “durable inducement pricing regime’’ is expected to emerge from the mid–to–late 2020s for copper, with a “take–off” in demand from renewable power generation, the electrification of light duty transport, and the infrastructure that supports them both, expected to be a key feature of industry dynamics.
“Looking even further out, long–term demand from traditional end–uses is expected to be solid, while broad exposure to the electrification mega–trend offers attractive upside. Grade decline, resource depletion, water constraints, the increased depth and complexity of known development options and a scarcity of high–quality future development opportunities are likely to result in the higher prices needed to attract sufficient investment to balance the market,’’ BHP said.
Sounds like a good reason to try your hand with an $8.3bn bid for a company like OZ that expects to more than double
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