Newspaper article The Evening Standard (London, England)

After Rio, Search Is on for Next Mining Target

Newspaper article The Evening Standard (London, England)

After Rio, Search Is on for Next Mining Target

Article excerpt


NO sooner had the ink dried on BHP Billiton's increased $148 billion([pounds sterling]75 billion) offer for Rio Tinto, than City speculators were scouring aroundfor the next likely bid target in the mining sector.

If the gossip is to be believed, the Brazilian mining giant Compania Vale doRio Doce will launch a bid any day now for Anglo-Swiss mining outfit Xstrata.Vale has already been given clearance by the Brazilian government to make sucha move and is putting in place the finance. Word is, Vale will offer 4500p ashare, which would value Xstrata at almost [pounds sterling]44 billion.

Reports claim the bid could prove expansive for Vale, with the consortium ofbanks that are providing the finance charging a risk premium of between 75 and200 basis points on top of the loan facility.

Dealers said this wide range of risk premium reflects the maturities of thedifferent tranches of the loan facility and their ratings. Shorter-datedtranches will come with lower yield margins, while those on longer dated partsof the facility will be wider.

Despite the bid talk, Xstrata shares drifted off with the rest of the miningsector today, trading 67p higher at 3857p.

BHP Billiton fell 71p to 1526p after offering those increased terms for RioTinto, 66p dearer at 5500p, following disappointing interim results.Speculators say BHP will need to dig deeper into its pockets in order to winthe day. The terms still fall short of the 6000p a share Chinalco paid for its9% stake last week.

Elsewhere, Lonmin International rose 26p to 2989p despite Citigroup becomingthe latest broker to take a bearish stance of the platinum producers'prospects. The US broker says Lonmin is under pressure to perform.

Shares generally opened lower today following Wall Street's worst performancein a year and heavy sell-offs in Far Eastern markets this morning. …

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