Rio Tinto Group may bid for WMC to boost output<\/p>\n
Bloomberg, London\/Sydney<\/p>\n
Rio Tinto Group, the world's third-largest mining company, may
\nbid for WMC Resources Ltd. to boost copper and uranium output,
\nchallenging BHP Billiton's A$9.2 billion (US$7.3 billion) offer,
\nsaid analysts.<\/p>\n
WMC accepted BHP's offer of A$7.85 a share on March 8, fending
\noff a hostile approach by Zug, Switzerland-based Xstrata Plc.
\nMelbourne-based WMC's shares rose to A$8.02 in Sydney on
\nThursday, indicating investors anticipate a higher bid.<\/p>\n
BHP wants WMC's Olympic Dam project in South Australia, site
\nof the world's biggest uranium deposit and fourth-largest copper
\nand gold deposit. Buying WMC would help London-based Rio Tinto
\nkeep up with BHP's growth, Merrill Lynch & Co. said March 8.<\/p>\n
"Rio is already a major player in uranium and copper and it
\nwould strengthen their position in both these commodities
\nsignificantly if they got hold of WMC," said Gavin Wendt, an
\nanalyst at Intersuisse Ltd. in Sydney.<\/p>\n
Shares of WMC rose 3 cents, or 0.4 percent, to A$8.02 on the
\nAustralian Stock Exchange. Rio Tinto's stock fell 9 cents, or 0.2
\npercent, to A$47.30 and BHP's fell 0.4 percent to A$19.14.<\/p>\n
The WMC purchase will be the mining industry's biggest since
\nthe March 2001 merger that formed BHP Billiton, the world's
\nlargest mining company. Producers of copper, nickel and other
\nmetals are expanding mines and seeking new reserves as China's
\nsurging demand drives prices to multiyear highs. Copper, used in
\nelectrical wiring, traded March 8 at a record in London.<\/p>\n
Rio Tinto's shares barely budged in 2004, lagging behind BHP,
\nwhose stock jumped 26 percent. BHP has approved $5.5 billion on
\nnew projects, while Rio's board has sanctioned as much as $3
\nbillion of spending.<\/p>\n
Lisa Cullimore, a spokeswoman for Rio Tinto in London,
\ndeclined to comment.<\/p>\n
Rio Tinto shares closed up 0.8 percent in London on Wednesday.
\nThey have climbed 20 percent this year, valuing the company at 29
\nbillion pounds ($56 billion). BHP, also dual-listed in Sydney and
\nLondon, has a combined market value of 47 billion pounds.<\/p>\n
"If BHP Billiton does get WMC, that would put them in a league
\nalmost untouchable," said Alfred Wong, who helps manage $12
\nbillion at UOB Asset Management in Singapore and owns shares in
\nBHP, Rio and WMC. "On the strategy aspect, Rio would be hard
\npressed to do something."<\/p>\n
Xstrata, the world's biggest exporter of coal burned in power
\nplants, said March 8 it won't raise its bid of A$7 a share.
\nShares of WMC, the world's fifth-largest nickel producer, have
\nclimbed 56 percent since Oct. 28, when WMC rejected Xstrata's
\ninitial bid.<\/p>\n
Rio Tinto might consider a bid that includes stock because
\nWMC's Australian investors, as many as half, would avoid a 15
\npercent tax on capital gains from BHP's cash offer, said Pieter
\nBruinstroop, who helps oversee $2.3 billion at APS Asset
\nManagement Ltd. in Singapore, including BHP and WMC shares.<\/p>\n
Rio Tinto has "been very focused on divesting assets when it
\nthinks prices are high and acquiring when it is low," Neil Boyd-
\nClark, who helps manages $580 million at ABN Amro Asset
\nManagement Australia Ltd. said in a March 8 interview.<\/p>\n
Adding WMC would give Rio Tinto a virtual monopoly over
\nAustralia's uranium production. The company's Energy Resources of
\nAustralia unit, acquired in 2000, is the world's third-largest
\nuranium producer and supplies 8 percent of global demand from the
\nRanger mine in Northern Territory.<\/p>\n
Rio Tinto's copper production fell 13 percent last year to
\n753,000 metric tons, or 4.8 percent of the world total, after
\nfatal landslides disrupted output at Indonesia's Grasberg mine.<\/p>\n
The company owns 40 percent of a venture with New Orleans-
\nbased Freeport-McMoRan Copper & Gold Inc. that runs part of
\nGrasberg, the world's largest gold mine and second-biggest copper
\nmine. Rio Tinto also holds 30 percent of Chile's Escondida copper
\nmine, the biggest.<\/p>",
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