No doubt it will be in the M&A sights, and given the 2012 start...

No doubt it will be in the M&A sights, and given the 2012 start date, an offer of $3, as I've said previously, could be a trigger point. If you can see beyond the recession a 25MTPA operation for $3 is ridiculously cheap. Already mooted in today's Melbourne paper.

From today's paper

November 05, 2008 12:00am
OIL baron John Paul Getty once said: "The meek shall inherit the earth, but not its mineral rights."

As spooked investors pile out of resources stocks on fears the global slowdown will slash demand for commodities, the time may be ripe for would-be acquirers to act on Mr Getty's words.

Weak share prices and the feeble Australian dollar have created perfect conditions for cashed-up foreigners to make opportunistic takeovers.

And the scarcity of easy capital means smaller players are looking at joining forces to cut costs and get much-needed funding for new projects.

DJ Carmichael analyst James Wilson predicts a wave of merger and acquisition activity in the mining sector in coming months.

"M&A is going to be massive: The guys who have a lot of cash in the bank aren't just looking at one acquisition, they're looking at swooping on two or three projects at once," he said.

"Companies are starting to fail and once these distressed assets start cranking up -- as they will -- it's going to be pretty cute."

In the energy sector, Santos may be a takeover target once the South Australian Government lifts its 15 per cent shareholder cap on the oil and gas producer at the end of next month.

Industry sources believe one or more of the offshore energy players vying for pole position in Queensland's emerging coal seam gas sector could show interest in Santos.

However, Malaysia's Petronas -- joint-venture partner of Santos in a proposed $7.7 billion liquefied natural gas plant at Gladstone in Queensland -- is considered the frontrunner.

BHP Billiton could switch its attention to Woodside Petroleum if its $115 billion hostile bid for Rio Tinto is foiled by European competition regulators.

BHP -- the world's only mining giant with an oil and gas business -- is already a partner in the Woodside-operated North West Shelf venture in WA.

As an Australian-headquartered company, BHP could avoid the problems that brought Anglo-Dutch Shell's bid for Woodside unstuck when then treasurer Peter Costello ruled against the proposed takeover in 2001.

On the mining side, Xstrata is the foreign suitor most likely to make its presence felt on the local scene, now the Anglo-Swiss giant's $10 billion bid for London-based platinum producer LonMin is no more.

OZ Minerals -- product of the $12 billion merger of Oxiana and Zinifex -- is looking vulnerable to a tilt from a big overseas player such as Xstrata or even Canada's Teck Cominco.

The copper, gold, zinc and lead miner's shares have tumbled from a high of $3.58 in May to a close yesterday of $1.03, down 4 for the day, as it struggles to deal with weak metals prices.

Further afield, there is some likelihood of consolidation in WA's Pilbara, home to the iron ore operations of BHP, Rio and Andrew "Twiggy" Forrest's Fortescue Metals as well as a grab-bag of small miners.

Carroll, Pike & Piercy research analyst Peter Rudd said Fortescue could be interested in acquisitions following Treasurer Wayne Swan's decision to allow third parties on the Pilbara's privately-owned rail networks.

"Now that Mr Forrest has access to BHP and Rio's rail lines, it has opened the way for all those far, far smaller players to do exactly the same thing," he said.

"They would be too small for BHP or Rio, but perhaps Fortescue could acquire some of these small deposits close to the rail lines and bring them on stream relatively quickly."

Brockman Resources, which owns the Marillana iron ore deposit, is considered one of the Pilbara's most attractive propositions.

Among the gold producers, industry sources name Newcrest Mining, Lihir Gold and SinoGold as the companies most likely to find themselves fending off the attentions of large international rivals such as Barrick Gold, Newmont Mining and AngloGold Ashanti.

And in coal, market speculation is centred on the Hunter Valley's Felix Resources and Centennial Coal, although infrastructure bottlenecks on Australia's east coast could prove a disincentive.

Although nobody knows just when the share market will hit rock bottom, Peter Strachan of StockAnalysis says it is only a matter of time before the panic-selling turns into a spending spree.

"There's so much fear out there -- people are selling whatever they can and there's simply no such thing as value," he said.

"There's definitely going to be action in the sector