iron ore price, page-1187

why dont they just buy Fortescue, lowest cost + high grades

JANUARY 16, 2015 12:00AM

A DEEP plunge in copper prices may have killed off the prospects of a Glencore bid for Rio Tinto any time soon.
Shares in Glencore — whose initial approach to Rio Tinto was rebuffed last August — hit their lowest level since listing in 2011 during Wednesday night trade, broadening the gulf in valuations between it and its target.

Glencore relies on copper for a greater share of its earnings than Rio Tinto, so it is more exposed to the 21 per cent fall in prices that has taken the red metal to its lowest level in more than 5½ years.
Glencore shares have now fallen about 27 per cent since July, when it first went to Rio Tinto with its proposed takeover. Rio Tinto shares have only fallen about 10 per cent.

The performance has widened the gap between the two, with Glencore’s market capitalisation now almost 40 per cent less than that of Rio Tinto. British takeover rules effectively bar Glencore from making another offer for Rio Tinto until April.

While recent price movements appear to be working against Glencore, Platypus Investment Management portfolio manager Prasad Patkar said the longer-term ambitions of the miner’s famously acquisitive management team should not be underestimated. “These people generally take a long-term view on commodity prices,” Mr Patkar said.

The broader pain across the mining industry could also open up other opportunities for Glencore to diversify, he said.

“They’d clearly shown an interest in iron ore in the past but hadn’t been able to complete a deal when everything was flying,” he said.

“If they still want to move, it’s playing into their hands a bit to have everything coming back.”
When it first listed in London in early 2011, Glencore was trading at about 530 pence. Its shares closed at a record low of just 244p in London on Wednesday.

The share price weakness means Glencore, led by chief executive Ivan Glasenberg, would need to issue considerably more shares if it were to agree an all-scrip deal with Rio Tinto.

“Ivan will have to absolutely think twice before bidding for Rio,” Paul Gait, a mining analyst at Sanford C. Bernstein, told Bloomberg. “It makes it a harder deal to do. He will have to issue more Glencore shares to pick up the Rio paper — he’ll be more diluted and his shareholders also won’t like it so much.”
Copper prices posted another sharp fall on Wednesday night before recovering slightly yesterday.