Why BHP’s OZ Minerals deal will prove to be a bargain

One of the most fascinating aspects of BHP’s fresh – and final – offer for copper pure-play OZ Minerals is how keen both sides are to tell you how expensive the deal is.

Further, BHP is paying a price to net asset value multiple of 1.2 times for OZ, compared to the average multiple of 1 in big mining MA deals in the past three years. The updated price also represents an enterprise value to earnings before interest, taxes, depreciation and amortisation multiple of 11.7 times, compared to 4.8 times in those recent deals.

But it’s hard to argue that Henry has lost the capital discipline in which he believes so strongly – for three good reasons.Firstly, it’s always important to acknowledge BHP has the lowest cost of capital in global mining, giving Henry plenty of runway before he even gets close to being undisciplined.

But the low-hanging fruit in copper is all gone – future mines will need to be much deeper, much more complex and probably in more tricky geographies. Top class assets like those within OZ Minerals will only become more valuable as the energy transition speeds up.Partners mining analyst Peter O’Connor, expect BHP may have to pay at least $30 to win due diligence, and perhaps even $40 to win the companies.

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