SYDNEY: The Australian government yesterday cleared Switzerland-based Xstrata Plc’s A$8.4bil hostile bid for WMC Resources Ltd, opening the door for other overseas bids and pushing WMC’s shares to a record high.
Australian Treasurer Peter Costello’s decision not to block the bid on national interest grounds ended months of speculation over whether Xstrata would be allowed to pursue WMC, which sits on 38% of the world’s uranium reserves.
WMC shares rose more than 3% to a record A$7.72 in active trade after the announcement, as investors bet the go-ahead could flush out other foreign bidders.
Analysts have suggested a long list of possible suitors, including Canada's Cameco Corp and Inco Ltd, South Africa’s Anglo American and Brazil’s Companhia Vale do Rio Doce. Dual-listed Anglo-Australian miners BHP Billiton Ltd/Plc and Rio Tinto Ltd/Plc have also been mentioned.
“This clearly opens up the prospect of competing bids by other foreign mining companies, but the reality is it is still set by the price of WMC stock, and whether you can afford an A$8.5bil investment,” said Global Mining Research analyst Tony Robson.
Xstrata raised its bid to A$7.20 a share on Feb 2 after obtaining less than 1% of WMC shares with an initial A$6.35-a-share offer.
The WMC board has not endorsed Xstrata’s bid and has openly invited other mining houses to inspect its mines and refineries across Australia in the hopes of attracting rival offers.
Costello disagreed with political critics of Xstrata’s bid, who argued it was in the national interest for WMC to remain in Australian hands because of the uranium reserves at its giant Olympic Dam project in the remote southern outback.
However, he said Xstrata must keep its coal and metals mining headquarters in Australia and keep up exploration work started by WMC. It must also consult the government before making third-party marketing arrangements for uranium.
Xstrata, which is bidding for WMC to get its uranium and nickel mines and double its copper production, markets its commodities globally through 40%-owner Glencore International AG.
It had paid A$2.1bil for Australia’s largest copper miner MIM in 2003, and also owns coal mines in South Africa.
In a letter to Costello that was distributed to the media, Xstrata chief executive Mick Davis said his company was already searching for an Australian resident to join its board. “Xstrata is in Australia for the long haul and a great deal of our future growth will be in this country irrespective of the acquisition of WMC,” he said. – Reuters