MCC, HZL Said To Be In Running For Anglo Zinc Business

Bid Expected To Realise $1 Billion

Metallurgical Corporation of China Ltd (MCC) and Hindustan Zinc are said to be in the running for the $1 billion worth of zinc assets put up for sale by miner Anglo American Plc.

MCC has recently begun to expand its overseas mining assets. An anonymous company official told the newspaper China Daily that "We intend to capitalize on the commodity price rally and the Anglo bid is in line with our strategy."

Most of MCC’s mining assets are located overseas. In February 2010 the company paid $200 million for a 5 per cent stake in Australian miner, Resourcehouse Ltd in a deal which saw it agree to buy coal from Resourcehouse and a 10 per cent stake in the China First coal project.

Hindustan Zinc is although thought to be bidding for the assets. The company recently became the world’s largest zinc miner and sources within the business have told the Indian press that the company is working on a bid.

Anglo American's zinc assets include the wholly owned Skorpion and Lisheen mines in Namibia and Ireland and a 74 percent interest in the Black Mountain mine in South Africa.

Anglo-American Profits Fall 53 Per Cent

Profits at mining giant Anglo American Plc fell 53% in 2009 as metals prices fell sharply as a result of the global economic downturn. The company also blamed falling demand, especially for its metallurgical coal and thermal coal.

The London-based firm reported full-year net profit of $2.42 billion, or $2.02 per share, compared with $5.22 billion, or $4.34 a share, in 2008.

Group revenue fell 25% to $24.6 billion from $32.9 billion.

Kumba Iron Ore Reports Earnings Up By 10 Per Cent

South African miner Kumba Iron Ore reported an increase in full-year earnings of 10 per cent to R23.4 billion, as export sales jumped 37% to 34.2 million tonnes. However, headline earnings per share fell to 21.82 rand ($2.86) from 23.02 rand in 2008, hit by a stronger rand against the U.S. dollar. Kumba said its operating profit remained highly sensitive to the rand/dollar exchange rate. The rand has risen by 20 percent since the start of 2009. Headline earnings are the main measure of profit in South Africa and strip out one-off, financial and non-trading items.


Kumba, Africa’s largest iron ore producer, saw an increase in exports to China of 130%. China now accounts for 75% of total exports. The company said it produced 41.9 million tonnes of iron ore last year, up from 36.7 million tonnes in 2008.


"Kumba is committed to a further increase in production volumes during 2010, with the continued ramp up of the Jig plant," the company said. "Although global steel demand is expected to return to growth in 2010, this is likely to be moderate and the sustainability of increase in demand outside of China remains uncertain," it added. Analysts expect exports to China to grow by 5% this year.


CEO Chris Griffith said " We expect demand for iron ore to rise further during 2010 as Chinese domestic iron ore production falls and a further recovery in steel markets outside of China, in our traditional markets, starts to take hold.”


Kumba is paying a final cash dividend of R7.40 per share, bringing the total cash dividend for 2009 to R14.60 per share. The company’s majority shareholder, Anglo American, reported that its 64% investment would generate underlying earnings of $490 million for the year ended 31 December 2009.

Anglo American Said To Be Seeking Bids For Zinc Business

UK newspaper The Independent On Sunday reports that Anglo American PLC is seeking bids on its zinc business by the end of this month.

The paper suggested that private equity groups Apollo and First Reserve are considering bids on assets said to be worth around $800 million.

Chinese Eye Anglo Zinc Assets

Several Chinese metal firms including China Minmetals Corp are in the fray to acquire Anglo American's divested zinc assets, according to sources familiar with the matter.

Minmetals, Shenzhen-based Zhongjin Lingnan Nonfemet Co Ltd and Canadian mining company Teck Resources, in which Chinese sovereign wealth fund China Investment Corp owns a 17-percent stake, are in talks for the zinc assets to help secure supplies of resources, the source said.

"After Minmetals' takeover of Oz Minerals, its zinc business has started to grow. Seeking other zinc projects to meet its growing demand is in line with the company's business strategy," the source said. Zinc is widely used in die-casting and battery manufacturing.

Minmetals paid $1.4 billion for the acquisition of Oz Minerals including the Rosebery zinc mines in Australia.

A source from China Minmetals who declined to be named admitted that the company was keen on acquiring Anglo American's zinc assets, but refused to divulge any further details on grounds of confidentiality.

Anglo American said last month it was trimming part of its management and also selling non-core assets to cut costs. The assets included Scaw Metals, Copebras, Catalao and the group's portfolio of zinc assets. Together with the Tarmac unit, which has previously been identified as non-core, these assets accounted for nearly 11 percent of the group revenue in 2008.

Its zinc assets include the 100-percent-owned Skorpion mine in Namibia and Lisheen mine in Ireland, the 74-percent-owned Black Mountain mine and Gamsberg Project in South Africa. Anglo American's zinc businesses produced 340,500 tons of zinc and generated revenue of $209 million last year.

The 21st Century Business Herald said Anglo American held talks with Chinalco, the country's largest producer of aluminum, and Baosteel, the country's largest steel mill, over the Scaw Metals unit.

Source: China Daily

Baosteel Wants Stake In Minas Rio Iron Ore Mine

Baosteel, China's largest iron and steel conglomerate, wants to forge an alliance with Anglo American, the mining company that rejected a merger approach from rival Xstrata in June.

Baosteel has tabled a proposal to pay £1bn for a 30% stake in Anglo's huge Minas Rio iron ore mine in Brazil, which it acquired last year for £3.7bn.

If Anglo agrees a deal with Baosteel, the Chinese company could help it fend off bids from predators such as Xstrata, which was told last week by the City's Takeover Panel to make a formal bid for Anglo by 20 October or walk away.

Baosteel, which is based in Shanghai, employs 112,000 staff and generates annual revenue of $21.5bn (£13.5bn). It is keen to expand internationally and has been exploring opportunities in Africa and Asia as well as South America.

Anglo has made it clear that it is seeking a partner to help develop Minas Rio, which is expected to produce more than 35m tonnes of iron ore by 2011. Production could rise by another 50% within a decade. Two other companies are understood to have contacted Anglo about buying a stake in Minas – the Bahrain-based Gulf Industrial Investment Company and Sojitz, a Japanese conglomerate. But Baosteel is understood to be the frontrunner.

Latin America is Anglo's fastest growing region and this week the group will take shareholders and analysts to Brazil and Chile to review its operations there. The trip is being seen by the company as an "opportunity to showcase Anglo's most attractive assets and to outline future growth prospects". Observers believe Anglo's management want to emphasise the "hidden value" within the company to underline their opposition to Xstrata's proposal for a nil-premium merger, which would create a company worth £40bn.

Anglo's shareholders have made it clear to new chairman Sir John Parker, who took over from Mark Moody-Stuart in August, that Xstrata's offer is unacceptable because of the absence of any takeover premium. Insiders say Parker is implacably opposed to a deal with Xstrata on the basis of the terms outlined four months ago.

Xstrata, led by Mick Davis, is under pressure to add a cash component to any future offer for Anglo, but will need to raise funds via a rights issue to make additional cash available. If Xstrata can find the money for a premium, shareholders are likely to force Anglo's management into talks. However, that would require Xstrata to find up to £10bn and analysts are sceptical that the Anglo-Swiss firm can raise that amount. "It is hard to see how they can get funds to provide a premium, so the deal must be as good as dead," one analyst says.

Xstrata's net debt stands at about £7.5bn, against a market capitalisation of £25.5bn. It has already raised £4.1bn in a rights issue this year, which could restrict its future capital-raising potential.

Source: The Guardian

Chinese Firms Seek Stake In Minas Rio Project

Chinese companies have approached Anglo American about taking a stake in the planned Minas Rio iron ore operation in Brazil as they look to secure supply from one of the world's biggest new mines and encourage production from miners other than the three giants, Rio Tinto, BHP Billiton and Vale.

Anglo, the world's fourth biggest iron ore producer after the big three, paid $US7 billion for Minas Rio in 2008.

Since then it has boosted the iron ore resource there from 300 million tonnes to 1 billion tonnes and says it has potential to increase this to 7 billion tonnes.

"We have been approached by quite a number of possible partners very keen to get in with us," Anglo chief executive Cynthia Carroll said yesterday.

She said Chinese groups were among potential investors but Anglo wanted to do more work on development plans and capital requirements of future stages before selecting a partner.

Anglo plans to begin producing 26 million tonnes of iron ore a year from the mine from 2012 and then ramp up production to about 80 million tonnes a year, which is just under three-quarters of the current capacity of BHP's Pilbara iron ore network.

China is keen to secure supply for future demand and, as evidenced by its support of Andrew Forrest's Fortescue Metals Group in Western Australia, wants also to encourage growth from producers other than BHP, Rio and Vale, which control 70 per cent of the world's seaborne iron ore.

"Iron ore demand out of China for us in particular is at record levels -- they can't get enough," Ms Carroll said.

Source: The Australian

Anglo-American In Iron Ore Stake Talks

There is growing talk that Anglo American is negotiating with a number of parties as part of efforts to cut its stake in its Brazilian iron ore unit and possibly use the proceeds to fend off an approach by Xstrata.

Anglo last week rejected a proposal from Xstrata for the two companies to merge.

Anwaar Wagner, an Old Mutual Investment Group South Africa analyst, said that given Anglo's stretched balance sheet, it made sense to sell up to half of its Brazilian iron ore business or possibly introduce a partner that would put up the capital to develop its Brazilian iron ore projects.

Wagner was not able to say how much Anglo would be able to get for selling half its Brazilian iron ore unit, but said the sale price should be as close as possible to the cost price.

Anglo bought the Minas-Rio iron ore project, 70 percent of the Amapa iron ore system and 49 percent of LLX Minas Rio for $6.65 billion (R53bn at yesterday's exchange rate).

Wagner said the sale of an interest in the Brazilian iron ore unit would allow Anglo to develop its iron ore, nickel and copper projects more quickly.

There were plenty of investors, especially in China, Japan, South Korea and the Middle East, that would be interested in taking a stake in the iron ore projects, he said.

Weekend reports suggested that Anglo was in talks with a number of parties, including Dubai Natural Resources World, Gulf Industrial Investment of Bahrain, Aluminium Corporation of China (Chinalco) and Japan-based Sojitz.

George Hudson, a London-based spokesman for Chinalco, said the aluminium group did not comment on speculation.

Anglo has estimated that it would cost $3.6bn to develop the Minas-Rio project.

Anglo spokesman James Wyatt-Tilby declined to speak about the newspaper reports, stating that the group did not comment on speculation.

Fitch Ratings yesterday said a combination of Xstrata and Anglo had the potential to create a number of benefits, including increased commodity and geographic diversification.

In another development, newspaper reports indicated that Anglo had approached former Rio Tinto chairman Jim Leng and National Grid's John Parker as candidates to replace chairman Mark Moody-Stuart.

London's Sunday Times said others on the shortlist included Thomson Reuters chairman Niall Fitzgerald and BHP Billiton director Paul Anderson.

"We are making good progress towards appointing a new chairman," Wyatt-Tilby said.

Source: Business Report, South Africa

SA - Xstrata/Anglo Merger 'Must Benefit Country'

South Africa's Department of Minerals and Energy will continue to engage with Anglo American and Xstrata on Xstrata’s proposed merger and would ultimately make a decision “in the best interests of the country”, according to spokesman Jeremy Michaels.

Minerals and energy director- general Sandile Nogxina held separate meetings with Anglo American CEO Cynthia Carroll and representatives of Xstrata yesterday after Xstrata last week proposed a “merger of equals” with Anglo American.

Anglo American has rejected the proposal and trades unions and government representatives have expressed fears about the effect such a merger would have on jobs and competition.

Xstrata emphasised it did not envisage making cost savings through retrenchments in SA.

Locally, Xstrata has coal, ferrochrome and platinum interests while Anglo American is prominent in platinum, coal, iron- ore and diamonds.

Outside SA, the two companies also cross-over in copper, nickel and zinc.

Michaels said Anglo and Xstrata had provided some details about the proposed merger but the department required more information before it could make a decision.

Anglo American and Xstrata declined to comment on their meetings with the department.

Source: Business Day

Anglo-American Confirms Xstrata Merger Proposal

London-headquartered Anglo American Plc, which manages the world's largest platinum producer, publicly confirmed on Sunday that it has received an initial merger proposal from Swiss-based miner Xstrata Plc that is expected to create a giant company in the commodity sector.

"The Board of Anglo American confirms that it has received a preliminary proposal from Xstrata which may or may not lead to a transaction involving the group," Miningmx quoted the company as saying today.

Both mining firms have said that they could not guarantee completion of a deal, which is estimated to be worth $68 billion (41 billion pounds) based on their stock market value on Friday.

The combined company would be a new top-tier mining giant with massive wealth of copper, nickel, coal, platinum and other metals and minerals. Both companies have coal mines in Australia and South Africa and copper operations in South America. The combined entity would be a global leader in the production of coal, ferrochrome, base metals and platinum.

"Xstrata believes a merger of these two world-class companies with complementary assets is highly compelling," Xstrata, the largest exporter of coal used by power plants, said in a brief statement on Sunday.

"Xstrata has already quantified substantial operational synergies from the combination that are not available to either company operating alone. In addition, Xstrata believes the optimization and reprioritization of the combined company's organic growth pipelines would significantly enhance shareholder returns," Xstrata added.

Glencore International AG, which has a 35 percent stake in Xstrata, has approved the merger transaction, according to the reports.

Xstrata Chief Executive Officer Mick Davis took the step after Rio Tinto Group accepted $5.8 billion in capital for launching an Australian iron ore joint venture with BHP Billiton, the world's biggest miner.

The company said in the statement, "Xstrata is seeking to engage with the Board of Anglo American regarding a merger of equals that would realize significant value for both companies' shareholders."

The companies have not disclosed the terms of merger proposal. Some analysts said that the proposal could be the step forward toward the possibility that South Africa could lose its iconic blue chip miner, Anglo American.

Source: AllHeadlineNews