the rumours of this deal may have helped today.Based on the...

the rumours of this deal may have helped today.

Based on the multiple paid for reserves AGM looks very very cheap still

full article

Xstrata buys Lionore for $5.4bn
By Ed Crooks

Published: March 26 2007 09:39 | Last updated: March 26 2007 09:39

Xstrata, the mining group has agreed a C$4.6bn ($5.35bn) bid for Lionore, the Canada-based nickel producer.

The deal follows Xstrata’s $18.8bn acquisition of Falconbridge, another Canadian mining group, last year.


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Ian Pearce, chief executive officer of Xstrata’s nickel unit, said in a statement: “This is an important step in our strategy to grow Xstrata Nickel into a truly global nickel business.”

Lionore is the world’s tenth largest nickel producer. It is based in Canada with its main listing on the Toronto stock exchange, but has operations in Western Australia, South Africa and Botswana.

Xstrata is offering C$18.50 per Lionore share: a 5.8 per cent premium over the closing price of C$17.49 on Friday March 23, and a 16.5 per cent premium on the weighted average price over the previous 30 days.

Shareholders, including directors, representing 19 per cent of Lionore’s shares have entered irrevocable lock-up agreements to accept the offer.

The announcement of the bid, which was unanimously recommended by Lionore’s board, came after reports in the Australian press on Monday morning that a deal was imminent.

Rumours of an approach from Switzerland-based Xstrata had been circulating in the market for several weeks.

Mr Pearce said on Monday: “With Lionore, we unleash opportunities to create value through additional production, strong synergy potential, access to new markets and increased opportunities for growth, and through optimisation of technology.”

When Xstrata reported its full-year results on March 6, Mick Davis, its chief executive, suggested he was already looking for his next big acquisition.

”The integration of Falconbridge is done and dusted. The team is ready to move on,” he said.

He also argued that the outlook for metals prices was good, driven by strong demand from China and India, while rising costs and skills shortages were constraining supply.

”There is no sign that commodity prices will return to their long-run averages,” he said, adding that 2007 would be ”a very good year”.

He also indicated ambitions in metals other than nickel, which Xstrata first took a position in with the Falconbridge deal. He said he was still interested in entering the iron ore, platinum, and bauxite/alumina markets, but Xstrata had not yet found the right deal.

After the results, top executives at Xstrata sold stock worth £27m, led by Mr Davis, who cashed in more than £11m of shares. The shares have had a very good run recently, rising from a low of £15.40 in the past 12 months to £26.05 on Monday morning, up 1 per cent from Friday’s close.

Over that period, the shares have out-performed the FTSE World Europe Index by 41 per cent.