Mining

China’s Fortescue deal not an iron ore victory

17 Aug 2009

The People s Republic publicly insists the 35% price cut agreed with the Australian miner should be a reference for settling China s remaining benchmark contracts. But this deal came with a $6bn financing for the mining upstart. Larger rivals BHP, Rio and Vale won t be impressed.

Cheap oil has become expensive

13 Aug 2009

Brent benchmark crude should be cheaper than its West Texas Intermediate rival, because WTI is easier to refine. But Brent is now selling for around $3 per barrel more, almost the widest gap this year. The explanation: US regulatory scrutiny and changing consumption patterns.

China steps back in Rio Tinto spy case

12 Aug 2009

After various Chinese channels alleged espionage against four of the miner s employees, formal arrest on suspicion of commercial bribery is a climbdown. China could be trying to depoliticise the case. But months of uncertainty still lie ahead.

Rio case tests Chinese legal system

11 Aug 2009

Under Chinese law, the July 5 detention of four Rio executives has to be officially approved, and explained, by this week. It s a chance for China to show it s willing to follow its own rulebook and for the miner to get some idea of how serious the charges against it are.

BHP’s new chairman may need new style

4 Aug 2009

Jac Nasser would be an obvious choice to supervise a company in trouble. Ford s former boss likes to shake things up. But at BHP, he may need to be emollient. Happy investors don t need drama, while governments concerned about commodity prices will test his diplomatic skills.

Xstrata puts little extra pressure on Anglo

4 Aug 2009

The Swiss miner is using its decent H1 results to reassert its credentials as a merger partner for Anglo American. Cost discipline and safety improvements suggest that anything Anglo can do, Xstrata can do better. But Xstrata will still need to pay a premium if it wants a deal.

Anglo American bolsters defences

31 Jul 2009

Facing unwanted merger interest from rival Xstrata, the miner needed a boost. Its interim update was never going to be stellar. But it shows hard progress on cost cuts and growth projects. That gives credence to Anglo s claim to be entering a period of enhanced value creation.

Rio Tinto stuck at Chinese road-block

28 Jul 2009

It s hard to negotiate with a government that has arrested four of your employees. That s where the miner stands. It can t settle iron ore contracts with its largest customer, which is statecontrolled. Nor can it be sure of approval for a tieup with BHP that would raise $5.8bn.

China’s new triumphalism is premature

17 Jul 2009

Arrests of Rio Tinto staff on bribery charges look like a power play, to be filed with swipes at US monetary policy. Economic success gives China's policymakers more global clout. But they should be careful. China still needs the world almost as much as the world needs China.

Where is Anglo’s Cynthia Carroll?

3 Jul 2009

The South African miner s CEO might be expected to lead the opposition against Xstrata s hostile stalking. But she has been strikingly absent from the public eye. With Carroll under a cloud even before the proposal, silence is a peculiar defence tactic.

Anglo American could be a mine of value

30 Jun 2009

The miner trades at a 15% discount to the sum of its parts. That presents an opportunity, as rival Xstrata has realised. If Anglo wants to stay independent, shareholders will have to be persuaded that it can close the gap on its own. Una Galani explains.

Anglo white knights may fancy Xstrata more

25 Jun 2009

Brazil s Vale or a Chinese group are possible alternative suitors for Anglo American if the South African miner opts for a whiteknight defence against Xstrata s unsolicited approach. The snag is that they might be more interested in Xstrata's collection of commodities.

Anglo suitors face rocky ride in South Africa

24 Jun 2009

Xstrata s proposed merger with its mining rival would face limited formal regulatory barriers. But South Africa s government has levers to frustrate any proposal it dislikes. Recent foreign moves on national icons may only encourage politicians to demand a pound of flesh.

Xstrata letter won’t be enough to bag Anglo

24 Jun 2009

The miner has published its merger of equals approach to Anglo, detailing annual synergies of at least $1bn. The industrial case is reasonably attractive. But unless Xstrata dangles some sort of premium, it s hard to see how it can entice Anglo into talks.

Anglo rejection shouldn’t be a final no

23 Jun 2009

Xstrata s idea of a merger of equals was totally unrealistic. But a deal has strategic merit. So while it s totally legitimate for Anglo to fight for better terms, it shouldn t dig in its heels so deeply that it torpedoes the chance of getting together.

Anglo-Xstrata poses management dilemma

22 Jun 2009

With Anglo s CEO Cynthia Carroll reportedly under fire from her own shareholders, the assumption is that Xstrata s dealhungry boss Mick Davis would run the enlarged miner following any deal. But a quick glance at their performance suggests the case isn t so clear cut.

Xstrata/Anglo merger-of-equals is a tough sell

22 Jun 2009

Miner Xstrata has put a friendly face on its proposed $70bn mergerofequals with South African rival Anglo American. But Xstrata is really seeking to capitalise on Anglo s weakness. With Anglo wary of a tieup and a hostile deal tough, Xstrata may have to prepare for a bear hug.

Xstrata can afford decent premium for Anglo

22 Jun 2009

The UKSwiss mining group has proposed a merger with South African rival Anglo American. But it could structure an allshare deal to pay a chunky premium to Anglo shareholders and still create value for its own investors. Breakingviews.com s calculator shows how.

China’s threat to BHP-Rio venture limited

19 Jun 2009

The iron ore deal which scuppered a tieup between Rio Tinto and China s stateowned Chinalco will almost certainly face regulatory scrutiny. But the joint venture looks unlikely to be blocked. Any sanctions China could impose on BHP and Rio could be selfharming.

Rio/BHP now need to watch out for Australia

8 Jun 2009

The joint venture between the two miners will strengthen their bargaining power visàvis their biggest customer, China. But shareholders shouldn t celebrate too enthusiastically. The Australian authorities may gobble up a big share of monopoly profits via higher royalties.