Australian multinational miner BHP Group's (NYSE:BHP) nearly $40 billion bid for rival Anglo American (OTC: NGLOY) may not be enough to acquire the company as other diversified miners will probably make rival bids amid the global scramble for copper assets.

After completing a $6.4 billion takeover of Australian copper producer OZ Minerals last year, BHP is doubling down on the red metal amid widespread expectations that demand will greatly increase in coming years as the global economy transitions from fossil fuels.

Solar and wind farms and electric vehicles require more copper than traditional utilities and internal combustion engine automobiles.

"This is the latest move to consolidate in industrial metals driven by a scramble for copper and other metals central to the world’s clean energy movement," Sean Casterline, founder of the investment consulting firm Delta Capital Management, told Benzinga.

BHP, already the world's biggest mining company, is currently the third-largest copper producer behind Chile's state-run Codelco and U.S.-based heavyweight Freeport-McMoRan Inc. (NYSE:FCX). A combination with Anglo American would push BHP to the pole position.  

"In our view, the copper assets are the primary driver of a proposed transaction," RBC Capital Markets analysts said. 

Rival Bids Seem Likely

BHP said it offered 25.08 pounds ($32.27) a share for London-based Anglo American, which said it is reviewing the proposal. The all-share deal values Anglo American at GBP 31.1 billion ($38.9 billion) and is contingent on the U.K. company spinning off its shareholdings in Anglo American Platinum Ltd. (OTC:ANGPY) and Kumba Iron Ore Ltd. (OTC:KIROY), which are both listed in South Africa.

The proposal represents a nearly 14% premium for Anglo American's London-listed shares and a 31% premium without the platinum and iron ore units.

Analysts said that probably isn't enough.

Also Read: Will Copper Reach $10,000? ‘An Essential Metal That Faces An Uncertain Future’

Anglo American's shares have been so beaten down recently that its board and shareholders probably see BHP's bid as undervaluing the company, including copper assets in Chile and Peru, where BHP also has copper operations. Anglo American's shares have been suffering because of operational problems, a disappointing production outlook and a slump in diamond and platinum-group markets.

BHP's offer is "a timid and somewhat convoluted bid" that "won't be enough to draw either Anglo's board or its key shareholders," Liberum analyst Ben Davis said. After BHP's offer, he raised Anglo's price target to 27.50 pounds ($34.41), a near 25% bump from the stock’s closing price before the offer was officially made public.

Jefferies analysts went higher, saying a price of at least 28 pounds ($35.04) per share would be required for serious discussions between the companies, and a takeout price north of 30 pounds ($37.54) per share would be the outcome of a bidding war.

"If BHP does indeed continue to pursue this deal, we would be surprised if other bidders do not emerge," the company said. "Let the games begin."

The RBC Capital Markets analysts pegged diversified miner Glencore (OTC:GLNCY) as one logical bidder because of the potential advantages in combining the companies' copper assets. The company also listed Vale (NYSE:VALE) as a possibility because of the attractiveness of combining iron ore assets in Brazil. 

Davis pointed to diversified multinational miner Rio Tinto (NYSE:RIO) as his top pick for an interloper, although he noted the company has a reputation for preferring to build mines rather than buy them.

Gold Miners Expand Copper Holdings

One reason why copper acquisitions are attractive is that building new copper mines from scratch is expensive and time-consuming.

That's especially true in the U.S., where getting a permit is difficult, or in other jurisdictions such as Panama, where a court ruling recently forced the closure of a huge copper mine after local protests, said Jason Crawshaw, portfolio manager at Polaris Capital, which invests in copper miners Lundin Mining Corp. (OTC:LUNMF) and Antofagasta (OTC:ANFGF).

"There is a scramble for assets," he told Benzinga. "Everybody is always looking to get more exposure to copper."

Even gold miners have been interested in bulking up on copper assets. 

Last year, U.S.-based gold mining major Newmont Corp. (NYSE:NEM) bought Australian gold miner Newcrest Mining Ltd. for nearly $17 billion, adding nearly 50 billion pounds of copper reserves and resources in one fell swoop.

Meanwhile, Canada-headquartered rival Barrick Gold Corp. (NYSE:GOLD) is spending nearly $2 billion to expand a copper mine in Zambia, targeting expanded plant production in 2028. 

Investors looking for diverse exposure to copper producers can consider the Global X Copper Miners ETF (NYSE:COPX), Sprott Copper Miners ETF (NASDAQ:COPP), Sprott Junior Copper Miners ETF (NASDAQ:COPJ) and iShares Copper and Metals Mining ETF (NASDAQ:ICOP).

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Photo: Anglo American copper mine in Chile courtesy of Anglo American Flickr