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Anglo's shares rise by 12.6% after London open

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Would be preceded by Anglo platinum, iron ore demergers

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BHP would gain access to more copper, potash, coking coal

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Australian miner has until May 22 to make firm offer

(Recasts with BHP statement confirming bid, share price)

By Melanie Burton, Scott Murdoch and Anousha Sakoui

MELBOURNE/LONDON, April 25 (Reuters) - BHP Group ( BHP )

said on Thursday it had made a $38.8 billion bid for

Anglo American, proposing a deal that would create the

world's biggest copper miner and sending its smaller rival's

shares sharply higher.

BHP said it will offer Anglo's shareholders 25.08 pounds per

share, a premium of 31%, and carve out the London-listed group's

iron ore and platinum assets in South Africa, where the world's

largest listed miner has no assets.

Anglo, which owns mines in countries including Chile, South

Africa, Brazil and Australia, said it was reviewing the

unsolicited, non-binding and highly conditional proposal.

The proposed deal, if agreed, would create a copper mining

group with around 10% of global output and also likely trigger

further transactions in the global mining industry.

"This is all about copper," said Ben Cleary, portfolio

manager at Tribeca Investment Partners, which holds shares in

both BHP and Anglo.

The mining sector has seen a slew of mergers and

acquisitions as companies review their assets to raise exposure

to metals deemed critical to the global energy transition.

"I think it's a good deal for BHP. Anglo is obviously very

much in play now and there's probably room for others to

interlope. This is going to set the whole sector on fire,"

Cleary said of the BHP offer.

The proposal comes after Anglo, which had a market

capitalisation of $37.7 billion as of Wednesday's close, began a

review of its assets in February in response to a 94% plunge in

annual profit and a series of writedowns due to a fall in demand

for most of the metals it mines.

BHP, the world's biggest listed miner and best-known for

mining iron ore, copper, coking coal, potash and nickel, had a

market capitalisation of about $149 billion as of Wednesday.

COPPER FOCUS

The deal, if agreed, would give BHP access to more copper,

one of the most sought after metals for the clean energy

transition, and potash, which are its key strategic commodities,

as well as more coking coal in Australia.

Technological developments such as artificial intelligence

and automation, and the energy transition, which includes

electric vehicles and renewable energy, have driven up demand

prospects for copper cable used to conduct electricity.

Anglo has copper mines in Chile and Peru, where BHP also has

operations, and their combined output would amount to around 2.6

million metric tons a year, pushing it well ahead of U.S.-based

Freeport-McMoRan ( FCX ) and Chilean state miner Codelco.

Copper prices on the London Metal Exchange have surged 15%

this year, approaching $10,000 a ton and two-year highs on

demand hopes sparked by encouraging macroeconomic data, U.S.

rate cut bets and speculative trading.

Supply bottlenecks driven by the forced December shutdown of

Cobre Panama, one of the world's largest open-pit copper mines,

are also fuelling the gains.

Anglo's 2024 copper production guidance is 730,000 to

790,000 tons. BHP is targeting copper production of between 1.7

million and 1.9 million tons for the 12 months ending in June.

ASSET CARVE-OUTS

Anglo said the proposal would be conditional on being

preceded by separate distribution of its entire stakes in Anglo

American Platinum and Kumba Iron Ore to its

shareholders, which would significantly lower its exposure to

South Africa.

Anglo's stakes in the platinum and iron ore miners are worth

$7.44 billion and $5.4 billion respectively, according to LSEG

data based on Wednesday's close of trade.

"Anglo would be a good strategic fit for BHP or another

major miner due to potential synergies, asset quality, and

commodity exposure (especially copper)," Jefferies analysts

said.

"Anglo consists of an undervalued portfolio of multiple

tier-1 assets... Anglo could be a compelling fit," they said in

a note, adding it could take a premium of around 28% above

Anglo's most recent share price to get the deal across the line.

Analysts expected the deal could also trigger a wave of

transactions for any other unwanted assets such as nickel,

manganese and diamonds, where Anglo owns 85% of industry giant

De Beers.

Anglo said its board was reviewing the proposal. Under UK

takeover rules, BHP has until May 22 to make a firm offer.

The combined coking coal assets of the two miners, both in

Australia's Queensland state, could also be subject to

regulatory scrutiny given the deal would merge two of the

biggest producers in the global seaborne market.

If the Anglo deal came to fruition, it would be the second

major acquisition for BHP in about a year after its 2023

purchase of copper miner Oz Minerals and adds to a frenzy of

global M&A activity.

Recent mega-deals in the mining sector include gold giant

Newmont's ( NEM ) $16.8 billion buyout of Australia-based

Newcrest Mining late last year.

If completed, the deal would likely be among the 10

biggest-ever mining deals by value and has the potential to

delist Anglo from the London market, a fresh blow to an exchange

that is struggling to retain big companies and attract IPOs.

($1 = 1.5396 Australian dollars)