LAST MAN STANDINGThe word is: Xstrata and owner Glencore are up...

LAST MAN STANDING

The word is: Xstrata and owner Glencore are up to something

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Barry FitzGerald Resources Editor
November 9, 2007
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IT WAS the talk of the London Metal Exchange's annual "dinner down under" bash in the Plaza Ballroom at the Regent Hotel in Melbourne on Wednesday night.

And it wasn't the resurfacing of the rumour out of London that the $US225 billion ($244 billion) BHP Billiton had the $US121 billion Rio Tinto in its takeover sights - one that had the effect yesterday of pushing Rio shares $1.18 higher to $113.40 when all else were dropping.

No, the strong rumour among the 350 international metals traders at the bash was that the privately held Glencore, the secretive Swiss commodities trader and miner, and its 35 per cent owned mining associate, the ever acquisitive and London-listed Xstrata, were close to signing a mega-merger deal that would combine their mining interests, if not a complete merger.

The talk was that the deal was set to go three weeks ago but had been held up pending the resolution of some technicalities. As with the BHP-for-Rio rumor, whether the Glencore-Xstrata merger sees the light of day remains to be seen. But among those at the "dinner down under" talking it up, there was agreement that it made a lot of sense.

Xstrata chief Mick Davis recently followed up last year's $US22 billion buying spree with a $US2.9 billion agreed bid for Kerry Harmanis' nickel producer, Jubilee Mines. He said then Xstrata - now a $US66 billion company - was up for another big deal.

"We remain an opportunistic organisation and our motto has been 'never let an opportunity slip by that's going to add value for shareholders'," Mr Davis said.

"I believe if there was another company-transforming deal that we felt we wanted to do, I have no doubt that we could finance it."

Xstrata has shown a willingness to pick up mining assets from its controlling shareholder in the past. At the time of its float in 2002, Xstrata acquired Glencore's Australian (Enex) and South African (Duiker) coal assets for $US2.5 billion, and in 2006 it acquired Glencore's one-third stake in a Colombian coalmine (Cerrejon) for $US1.7 billion, serving up Glencore a $US997 million gain.