China bid for WMC looms
By Robin Bromby
12feb05
PETER Costello's decision not to stand in the way of Xstrata's $8.4 billion bid for WMC Resources has raised speculation that Chinese interests could pounce on the Australian miner.
But Rio Tinto remains the company most likely to try to outbid the Anglo-Swiss Xstrata's $7.20 a share offer, with some analysts predicting a rival takeover offer within days, following the Treasurer's decision.
But analysts point to the fact that WMC has itself been trying to interest the Chinese in playing some future role in its flagship Olympic Dam uranium-copper-gold mine.
China Minmetals is seen as a potential bidder for WMC - and the quick signing of an uranium export agreement with China would make that possible. Chinese companies are now scouring the world for resource security.
Yanzhou Coal bought the Southland colliery in the Hunter Valley two months ago and Chinese enterprises have been snapping up proposed iron ore supplies from the Pilbara.
Minmetals, a Beijing-based trading house that is trying to transform itself into a broadly based resource company, has been in negotiations for a takeover of Canada's largest miner, Noranda. Chinese companies have also shown interest in buying North American companies with oil and gas assets.
Shares in WMC yesterday soared 21c to a record high of $7.70, valuing the group at more than $9 billion. Before rumours leaked of Xstrata's interest in the group in late October, WMC shares were changing hands at just $4.92, for a market value of $5.8 billion.
Xstrata initially bid $6.35 a share, but earlier this month lifted its offer to $7.20. Both offers have been rejected by WMC directors, who are trying to rustle up higher bids by giving potential suitors tours of Olympic Dam in outback South Australia.
Hartley's head of research, Kevin Tomlinson, sees Minmetals as a contender for WMC. Australia and China did not have a treaty on uranium, "but that could be fixed quickly behind closed doors", Mr Tomlinson said.
Another possibility would be for the Chinese or Brazil's CVRD to get involved in an Olympic Dam joint venture, meaning that WMC would survive.
Mr Tomlinson thinks that Rio Tinto is more likely than BHP Billiton to want WMC - and there would be little concern in Rio's London headquarters about obtaining Foreign Investment Review Board approval. "If they (Xstrata) can get it, anyone can," he said.
Another analyst said Minmetals would probably prefer WMC to Noranda because the Australian company fully owns all its operations. "It's much cleaner - with WMC they get 100 per cent of everything but Noranda doesn't have that advantage."
While Rio had a reputation for not overpaying for acquisitions, picking up WMC would reinvigorate its copper business, allow it more flexibility with uranium and add on nickel.
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