Anglo Touts S America Projs, Awaits Xstrata Bid Decision
October 08 2009 - 11:15AM
Dow Jones News
Global diversified miner Anglo American PLC (AAL.LN) this week
looked to distance itself from suitor Xstrata PLC (XTA.LN) by
highlighting progress on and potential production from its major
growth projects in South America.
Xstrata in June proposed a "merger of equals" with Anglo
American where no cash would change hands and shareholders from
each miner would end up with half of the combined company. Anglo
rejected the tie-up and Xstrata now faces an Oct. 20 deadline to
make a formal offer or walk away for six months.
Anglo didn't name Xstrata in its presentations but a cornerstone
of its defense has been long-term growth potential, particularly
its Los Bronces copper project in Chile and its Barro Alto nickel
and Minas Rio iron ore projects in Brazil.
"Anglo American has prioritized investment in the development of
its three key near-term strategic growth projects during the
economic downturn in order to position the group to capitalize on
the next phase of global economic growth," it said Thursday.
Minas Rio is the biggest and most complex of the projects. It
has come in for particular scrutiny due to its price tag - the
miner paid $6.65 billion to acquire it - and delays gaining
necessary permits.
Anglo has budgeted another $3.6 billion for phase one of the
project, which is on track for first production in the second
quarter of 2012 and output of 26.5 million tons of iron ore in
2013.
"Overall the trip gave us the comfort that this project was on
track, but still had some permitting risk," Liberum Capital said in
a note to clients.
Morgan Stanley analyst Ephrem Ravi estimates that completion of
the project's phase one would add 220 pence in value to Anglo's
share price at a long-term iron ore forecast of $50 per ton.
"And we think Phases II and III can more than double that
depending on timing," Ravi said.
Xstrata declined to comment on Anglo's investor trip.
A merger of the two miners would create a $90 billion company
and the world's biggest producer of thermal coal, platinum and
ferrochrome, and a top-tier producer of copper, nickel, coking coal
and iron ore.
Xstrata argues that the new company would generate at least $1
billion a year in cost savings, and be better positioned to compete
against larger peers such as BHP Billiton Ltd. (BHP).
Company Web sites:
www.angloamerican.co.uk
www.xstrata.com
-By Jeffrey Sparshott, Dow Jones Newswires; +44 (0)207 842 9347;
jeffrey.sparshott@dowjones.com