BHP's $40B Anglo Bid to Shake Up Australian Met Coal Market

BHP's $40 billion acquisition proposal for Anglo American would have profound implications for the global metallurgical coal market. The deal would combine the top two met coal producers in Australia, creating an entity that controls over 10% of total world met coal exports.

Currently, BHP is the largest met coal producer in Australia through its BMA assets including Goonyella Riverside, Broadmeadow, Peak Downs, Saraji and Caval Ridge mines. However, BHP's Q1 2024 met coal production of 17.4 Mt was down 16% year-over-year due to wet weather impacts and an operational suspension following a fatality at Saraji. BHP has increased cost guidance to $119-$125/t and lowered production guidance to 21.5-22.5 Mt.

Anglo American, which would be acquired under BHP's proposal, is the second largest Australian met coal producer with the Moranbah, Grosvenor, Aquila, Dawson and Jellinbah mines in Queensland. In contrast to BHP, Anglo reported a 7% increase in Q1 coal production to 3.8 Mt, driven by its Aquila operations. Anglo maintained guidance of 15-17 Mt production at $115/t cost.

The combined BHP-Anglo entity would have a diverse portfolio of low and high-quality met coal assets across the key basins of Queensland and New South Wales. This would position it as the preeminent supplier to global steelmakers and give it increased pricing power.

However, the merger faces scrutiny over competition concerns and the long-term outlook for met coal demand amid decarbonization efforts. Integrating Anglo's assets smoothly would also be a major operational challenge.

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