Mining big BHP Group on Thursday mentioned it had made an all-share takeover provide for rival Anglo American, valuing the smaller firm at £31.1 billion ($38.9 billion).

Anglo American shares have been 13% greater at 10:05 a.m. in London.

The corporate confirmed it had obtained an “unsolicited, non-binding and extremely conditional mixture proposal,” which it mentioned it was reviewing with advisers.

Australia-based BHP, the most important listed miner in response to Corporations Market Cap, mentioned that the deal would ship 0.7097 BHP shares per Anglo American share to Anglo American’s extraordinary shareholders.

BHP mentioned the mixture would optimize Anglo American’s “belongings and long-term development potential” with its personal “greater margin money generative belongings and development initiatives together with its bigger free money flows and stronger steadiness sheet.”

A mix of the companies would kind a juggernaut in copper mining and the world’s largest participant within the house which might provide 10% of world output, in response to a Reuters evaluation. Anglo American has an enormous copper operation based mostly in South America and a manufacturing goal for the metallic of 730,000 to 790,000 tons in 2024. This compares with a copper output goal between 1.7 million and 1.9 million for BHP over the identical interval.

Mining companies are in search of to shore up copper provides over time forward as a result of projected shortages and the metallic’s key function within the vitality transition, with makes use of in electrical autos, energy grids and wind generators.

Copper seems to be “the principle prize that BHP is preventing for” as a result of its perceived future development potential, Todd Warren, portfolio supervisor at Tribeca Funding Companions, instructed CNBC’s “Road Indicators Europe” on Thursday.

BHP in 2023 accomplished an acquisition of OZ Minerals, concentrating on its copper and nickel portfolio.

The mining trade has skilled an uptick in merger and acquisition exercise over the past 4 years as firms place themselves for altering demand patterns, although not on the size of a possible BHP-Anglo deal.

Dan Coatsworth, funding analyst at AJ Bell, mentioned the mining sector was now “reverting to outdated habits and chasing mega-mergers.”

“Anglo American was a sitting duck after the sharp decline in its share value final yr,” Coatsworth mentioned in emailed feedback, noting the 39% decline in its market worth final yr as a result of operational setbacks, weaker commodity costs and downgraded manufacturing steerage,” he mentioned in a Thursday be aware.

“That supplied a chance for a bigger rival to pounce on the enterprise, taking a long-term view that its belongings have appreciable worth and any short-term operational points could be fastened,” he added, noting that BHP can have been notably focused on publicity to “to massive, low-cost and long-life belongings” throughout iron ore, metallurgical coal, potash and copper.

A deal would additionally enhance BHP’s diamond sector publicity, given Anglo American’s 85% shareholding in famed miner and retailer De Beers.

BHP might look to demerge the enterprise as a result of latest difficulties in diamonds from decrease luxurious items demand and competitors from lab-grown diamonds, Coatsworth flagged.

BHP has already mentioned that its proposal is contingent on demergers by Anglo American to its shareholders of its stakes in South Africa-based Anglo American Platinum Restricted and Kumba Iron Ore Restricted.

Together with waning demand for diamonds, platinum has been described by some analysts as a much less enticing long-term asset as a result of shift away from combustion engines, during which it’s used.

The mining trade has felt for a while that “variety is king,” Tribeca’s Warren instructed CNBC.

“However the actuality we have seen within the markets is that while various belongings, relying on what these belongings are, appeal to worth and capital markets curiosity… these belongings specifically are usually not valued as extremely anymore. That creates the opportunistic timing of BHP’s bid,” Warren mentioned.

BHP in 2022 merged its dual-floated enterprise right into a single authorized entity with a major itemizing in Australia.

Markets had closed earlier than the announcement Thursday morning.