MELBOURNE, May 14 (Reuters) - BHP Group ( BHP ) is

likely to sweeten its $43 billion takeover offer for Anglo

American for a second time and possibly add cash, investors in

both companies said on Tuesday, after the London-headquartered

target rejected a higher bid.

Anglo said the improved all-share offer, up 10% from BHP's

initial proposal, continued to significantly undervalue the

company.

Shares in BHP were trading 0.5% lower at A$43.03 on Tuesday.

BHP has until May 22 to return with a binding offer or walk

away under UK takeover rules. The revised bid again required

Anglo to sell its shares in iron ore and platinum assets in

South Africa, a structure Anglo says is unattractive.

"The language in the release suggests it's not the best and

final offer, said Todd Warren, a portfolio manager at Tribeca

Investment Partners, which holds Anglo shares.

Anglo said on Monday it had accelerated plans to deliver its

standalone strategy and would update investors on Tuesday.

"The market is waiting with baited breath for the details of

Anglo's strategy day. There's not a lot Anglo can do to realise

the immediate value that would be daylighted by accepting a BHP

bid," Warren said.

BHP CEO Mike Henry is due to present at Bank of

America's global mining conference in Miami later on Tuesday.

Several Australian fund managers holding BHP shares spoke to

Reuters ahead of his presentation on condition of anonymity

because of the sensitivity of the matter.

One BHP investor said it would be reasonable for the miner

to add a cash component to get the deal done, though the overall

deal structure was complex, which raised risks around Anglo

achieving acceptable prices for unwanted assets.

A second BHP investor said he would be surprised if BHP did

not come back with another offer, adding that it still had scope

to add a cash component.

"The copper is what we like," the investor said. "I think

there is investor support broadly for another bid."

Copper prices have climbed 12% in the past six weeks to hit

two-year highs on Tuesday above $10,200 a metric ton.

Anglo is attractive to its competitors for its prized copper

assets in Chile and Peru, with demand expected to rise as the

world moves to cleaner energy and wider use of artificial

intelligence will drive power use. Copper is highly efficient at

transporting power because of its conductive properties.

Anglo's rejection was disappointing but BHP was in a

difficult position given the need to balance a strong run in

copper prices and the need to stay financially disciplined, said

a third BHP investor.

BHP's latest offer of 27.53 pounds per share, up from an

initial 25.08 pounds, would lift Anglo shareholders' aggregate

ownership in the combined group to 16.6% from 14.8%. Anglo

shares closed 2.4% lower at 27.07 pounds on Monday.

Jefferies analysts said it might need to raise its offer

above 30 pounds per share to gain approval from Anglo's board.

"We are just not sure that BHP is prepared to go that high.

This latest offer could be final," Jefferies said.