MAC: Mines and Communities

Xstrata soars on BHP Billiton takeover talk

Published by MAC on 2009-04-06

Herald Sun

TALK of a possible BHP Billiton tilt at Xstrata has put a rocket under the Anglo-Swiss mining giant's London-listed shares this week. Speculation that BHP and Brazilian iron ore giant Vale have Xstrata in their crosshairs has swirled through London business circles in recent days.

Investors seized on the rumours to send Xstrata shares jumping nearly 10 per cent on Wednesday night. The stock was up another 9 per cent in early London trading last night.

Asked to comment on the rumours, Stock Resource analyst Steve Bartrop said BHP Billiton boss Marius Kloppers was likely to take advantage of the deep declines in global share markets to undertake some sort of corporate activity.

But he added that Mr Kloppers was more likely to revive his approaches to Rio rather than train his sights on Xstrata.

"I think Marius will do something, but it wouldn't surprise me if something came out of Rio again," he said.

"The assets are so appealing and there's some dissent about whether Chinalco will get it through the approvals process."

BHP dropped its $US66 billion bid for Rio in November last year in the face of the global financial crisis.

In other developments, Xstrata copper chief executive Charlie Sartain told Brazilian media the miner was eyeing small to medium-size producers of the red metal because the collapse in global share markets has slashed the cost of potential targets.

"We'd certainly be looking at acquisitions as part of our growth," he said. "We're looking at shifting our focus."

Mr Sartain's comments come hot on the heels of Beijing-backed Minmetals' revised $1.75 billion friendly bid for OZ Minerals, following Treasurer Wayne Swan's ruling last week against the original offer because of the Prominent Hill copper-gold mine's proximity to the Woomera weapons testing range.

Minmetals' new bid for OZ Minerals excludes Prominent Hill and promises to wipe out the stricken miner's $1.2 billion debt and leave it with about $600 million cash.

The proposed deal has already sparked speculation about third-party interest in what remains of OZ Minerals, which will be highly vulnerable to further takeover attempts as a one-mine operation.

Although Mr Swan's ruling on Prominent Hill means the most likely bidders are cashed-up local players such as BHP Billiton or Newcrest, Xstrata could potentially find it easier than Minmetals to win regulatory approval because it is not government-owned.

Xstrata, which owns the Mount Isa Mines copper operation in far north Queensland, may also be running the ruler over some of the small producers scattered through the area.

Failed miner CopperCo, for example, owns the Lady Annie copper mine 120km north of Mount Isa. Interested parties are submitting bids for the asset to receiver Deloitte ahead of a deadline later this month.

Elsewhere, Matrix Metals, also in administration, owns the Mount Cuthbert copper project; Aditya Birla holds the Mount Gordon copper operation, which was shut down earlier this year to ride out the commodities crisis; and Canadian gold giant Barrick operates the Osborne copper mine.

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