The attempted takeover of one rival mining company by another appears to bear little relevance to global tech sector, but last Thursday’s £31.1bn hostile bid by Australia’s BHP for its rival Anglo American’s business highlights the importance of one valuable commodity.
It’s not Anglo American’s diamond mining business, De Beers Group, that BHP covets, but the London-listed company’s copper mines in Chile and Peru.
Anglo dismissed the bid on Friday, indicating that the all-stock offer “significantly undervalues” the company and its supplies of this semi-precious red metal.
Used in everything from toasters to semiconductors to data centres, copper has risen in price on the global markets by more than 15% in recent months and is considered a crucial metal in the transition to a greener economy.
In the coming years, millions of metres of copper wiring will be needed to build the more complex grids that can handle electricity produced by decentralised renewable sources and balance out their intermittent supplies.
The International Copper Association predicts that solar and wind farms, often spread out over large areas, require more copper per unit of power produced than do centralised coal- and gas-fired power stations.
Electric vehicles, meanwhile, use more than twice as much copper as combustion engine cars do.
The International Energy Agency estimates that copper demand from green uses propelled by the EV boom and undersea cabling for wind farms, will nearly double by 2040.
And yet a lack of investment in copper mines, the logistics and expense involved in mining, and geopolitics, has meant that supply has been particularly tight in 2024.
Most copper ore mines are situated in Chile, Peru and African countries such as the Democratic Republic of Congo (DRC), all of which have endured political instability in recent years.
The most recent upset in terms of copper supply has come from the Central American country of Panama, when the government suddenly closed Canadian firm FQM’s copper mining operations in its country last December, following a Supreme Court order that deemed a new contract between the company and the government ‘unconstitutional’.
This mine produced 350,000 tonnes of copper in 2022 – a quantity that represents 1.5% of the global copper supply.
While protesters argued that the Panama mine was threatening rainforest and animal habitats, the issue had become heavily politicised.
400 new mines needed to met future EV battery demand
It certainly demonstrates how governments are becoming more involved in operations as they see foreign companies moving into their territory to extract valuable commodities, shipping them offshore to create high-value products.
In this regard, copper is becoming the new oil.
The world’s biggest consumer of copper, China, has compensated for poor domestic reserves by snapping up mines overseas, such as the Tenke Fungurume copper ore mining in the DRC, while building out massive smelting capacity domestically to turn it into pure copper.
But what if this dynamic were to change?
Commentators say that a copper shortage could cause a surge in price that risks damaging the economics of the green economy (and the AI economy too, if you think about the data centres we are going to need to power this tech).
Manufacturers of clean energy technologies are currently exploring ways they can use less copper in their products – some EVs are already using aluminium wiring.
Meanwhile, the price of copper has jumped from around $9,000 per metric ton to $10,000 a ton this year already and, although the BHP bid failed, it is unlikely to be the company’s last attempt to buy Anglo American, given the lack of new mines on the horizon.
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