Shares in BHP fell 4.6 per cent or $2.09 to $43.14 in morning trade on Friday after it made the all-share offer worth almost $60 billion for London-headquartered rival Anglo American.
BHP said the proposed deal would increase shareholders' exposure to "future-facing commodities" through Anglo American's copper assets.
Merged, they would become the world's biggest producer of copper with about 10 per cent of existing supply and would have greater exposure to nickel and the future of steel.
"A lack of new mined copper resources is a major obstacle for the energy transition and mining companies are facing growing resistance to building new mines, forcing them to merge to achieve growth," according to Yongcheng Zhao, principal copper analyst at Benchmark.
With steel needed for turbines, wind towers and transport, the deal would also combine BHP's iron ore and metallurgical coal with Anglo American's iron ore operations in Brazil and metallurgical coal assets in Queensland.Â
The combined entity would retain BHP's global listings on the Australian, London, Johannesburg and New York stock exchanges.
The bid follows BHP chief executive Mike Henry's warning in 2023 that there was not enough copper available to electrify the global economy.
BHP said the "potential combination" would bring together their strengths to generate significant cash flows and have the financial clout to support value-adding growth projects at an "optimal time", while continuing its commitment to shareholder returns.
Anglo American would bring its assets and long-term growth potential, while Australia's BHP has higher margin cash generative assets and growth projects along with larger free cash flows and a stronger balance sheet, BHP said.
"The combined entity would have a leading portfolio of large, low-cost, long-life Tier 1 assets focused on iron ore and metallurgical coal and future facing commodities, including potash and copper," BHP said.
The proposal is non-binding and subject to the usual conditions including completion of due diligence, with Anglo American offered reciprocal due diligence on BHP.
Anglo American said the board was reviewing the proposal, which would be preceded by separate demergers of the group's platinum business and Kumba iron ore operations in South Africa.
UBS and Barclays are advising BHP on the deal that would give shareholders of Anglo American 0.7097 BHP shares for each share in Anglo American.
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