While the price of copper has been falling amid concerns of an economic downturn, King said resources giants, including BHP, were acutely aware there was a massive shortfall of critical minerals that the world will need to transition to carbon neutrality.

“What’s really interesting is BHP has only just consummated the deal to divest its oil and gas assets with Woodside, and it is obviously moving very quickly to expand in this critical minerals space,” he said.

“To have what Oz Minerals has, in a stable jurisdiction ... that’s obviously worth a lot.”

Saul Kavonic, an energy analyst with Credit Suisse, said valuing Oz Minerals at the peak of its share price in January this year meant BHP would need to add another $1.4 billion to the value of its offer.

“It is possible that BHP increases its offer in order to engage,” Kavonic said.

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“The upper end of BHP’s net debt target supports additional headroom from a capacity perspective, but ... in our view the offer is already expensive.”

Kavonic said BHP’s decision to make its move now, instead of waiting for further weakness in the copper price, had reinforced Credit Suisse’s view that the company may be feeling pressure to embark upon more merger-and-acquisition activity for future-facing commodities after shrinking its exposure to fossil fuels, “even if it comes with an expensive price tag”.

BHP chief Mike Henry said BHP was disappointed with Oz Minerals’ rejection of its “compelling” offer and refusal to open its books.

“Our proposal represents compelling value and certainty for Oz Minerals shareholders in the face of a deteriorating external environment and increased Oz Minerals operational and growth-related funding challenges,” Henry said.

Oz Minerals, which operates two copper and gold mines in South Australia, last month reported a drop in copper production and slashed its output target because of coronavirus-related labour shortages, supply chain disruptions and maintenance issues.

Oz Minerals’ South Australian mines are located either side of BHP’s massive Olympic Dam copper hub, which BHP believes could drive significant synergies. Oz Minerals also has a nickel development in Western Australia, where it is approaching a $1 billion investment decision.

Morgan Stanley analyst Rahul Anand said BHP’s offer for Oz Minerals “makes sense”.

“Although the deal is at a premium to recent prices, Oz Minerals shareholders are likely to weigh the offer against their expectations of the long-term copper price and recent peaks in the Oz Minerals share price,” he told clients.