Mining

Iron ore price hikes likely to be short-lived

24 Feb 2005

The 71.5% hike in a benchmark iron ore contract reflects an unexpected rise in demand. But the situation is less alarming than it appears. Prices are likely to fall back next year as new capacity hits the market.

Xstrata yields to invisible pressure

2 Feb 2005

The UKlisted miner has raised its offer for WMC by 13% to A$8.4bn. The market had rejected the first bid, despite lacking any alternative. WMC shareholders are still hoping for more. But the shadowboxing is probably over. From this level, a counterbid is unlikely.

Moscow talks unlikely to end Gold Fields standoff

7 Jan 2005

The conversations cannot be easy. Gold Fields, Harmony and Norilsk all have good reasons to distrust each other. But they are all also under strong pressure to find a peaceful solution. That requires someone to abandon an entrenched position. The Harmony bid for Gold Fields is out of the money. And Norilsk must not be too happy with its ally. So it wants to talk. Gold Fields is willing to listen, because it does not like having 32% of its shares in hostile hands. But there is no obvious alternative.

Xstrata tries to crush hope for better WMC offer

10 Dec 2004

The Swissbased miner s threat to lower its A$7.6bn ($5.6bn) offer looks like bluff. But WMC shareholders may not find a better deal. The Australian miner s defence is not persuasive. And no others bidders have emerged.

Gold Fields troubled after Iamgold deal rejection

8 Dec 2004

Its strategy is discredited, and it faces two big hostile shareholders. There is no easy way forward. It could try to sell its international assets and buy out the dissidents. Or it could just tough it out, maybe with new management.

Harmony finds Gold Fields an elusive target

30 Nov 2004

The South African miner only received 10.8% of Gold Fields' shares in its early settlement offer. And they can't be voted. Gold Fields might get away with its Iamgold transaction. But even if it doesn't, Harmony's offer looks likely to fall short.

Hostile M&A makes a comeback

28 Nov 2004

There has been a rash of hostile action: Xstrata/WMC; Harmony/Gold Fields; Melrose/Novar; EADS/Thales; Bollore/Havas. The reason? Predators want bargains but targets don t want to sell on the cheap. Investors, though, may have a different view from managers.

Gold stocks aren’t sharing in gold boom

26 Nov 2004

Normally, unhedged gold stocks are a geared play on bullion. But not this year. There are three reasons why. The surging gold price may not be sustainable; mining firms costs are rising in dollar terms; and the industry is on an investment spree.

Gold Fields defence moves off the back foot

22 Nov 2004

For the first time, the gold miner has started to talk about value as it tries to repel hostile bidder Harmony. That s good. But there are two problems. The approach is inconsistent with recent strategy. It is also partly valuedestructive.

Xstrata goes hostile in A$7.4bn WMC cash bid

22 Nov 2004

The Australian miner has snubbed its bid but Xstrata doesn't want to pay a bigger premium on what it already sees as a frothy share price. So Xstrata is simply bypassing the board and taking its offer direct to investors.

Harmony’s clever tactics look like prevailing

15 Nov 2004

The South African miner is close to snaffling the larger Gold Fields, despite offering its own unattractive shares. Harmony has exploited Russian and South African politics, and a regulatory loophole. But Gold Fields' own errors made it easier.

Gold Fields should reconsider Iamgold deal

3 Nov 2004

The South African miner's case against attacker Harmony is strong. But so is Harmony's case against the proposed Canadian connection. Gold Fields is legally bound to recommend the deal. But new South African currency regulations provide a reason to be less enthusiastic.

Is Harmony bold or desperate?

29 Oct 2004

Either the company's management is irrational or it thinks Harmony's stock is overvalued. The miner's shareholders will give up value to get control of the Gold Fields. Optimistic synergy targets barely compensate.

Xstrata makes pre-emptive $5.4bn approach to WMC

28 Oct 2004

Mick Davis, Xstrata s CEO, clearly wants to make his company a mining major. But to date he's been price sensitive. He's trying to win over the Australian miner by making a cash approach. This may succeed, but if there's a bidding war, Xstrata may not win.

Russians back all-paper bid for Gold Fields

18 Oct 2004

Norilsk is offering its 20% of Gold Fields to upstart Harmony, mainly because it wants a safer haven outside of Russia. But other Gold Fields shareholders might be less enthusiastic. They have to believe that Harmony management offers a big improvement.

Xstrata buys back 10% of its shares

12 Aug 2004

It is a good time to be miner, especially one with mediocre assets. Xstrata would like to grow, but does not want to buy at the peak. It is starting to act as if it thinks the good times will last. But don't imagine that the mining group's expansionary management has abandoned acquisition ambitions. The buyback is reversible. And Xstrata thinks the commodity price boom will endure. So it's probably only a matter of time before it's sniffing out another big deal.

Commodities not entering a new paradigm

13 Jul 2004

Sure, prices are up. But the move is cyclical. As always, today s higher prices will lead to higher investments, and then to lower prices. Optimists are starting to say that this time will be different. But they underestimate the power of innovation.

Newmont merger talk may be fool’s gold

7 Apr 2004

Rumours of a Newmont bid for Canadian rival Barrick are persistent. And there is some logic to a deal. But Newmont should not let the frenzy of the gold market get in the way of good sense a Barrick takeover would be too expensive.

Gold bugs are on the G7 lookout too

4 Feb 2004

It increasingly looks as though the G7 won t muster any more support for the dollar this weekend than they did last November. If the dollar resumes its fall, the dollar price of gold would soar and, for the first time, rise in other currencies too.

Vedanta IPO shows volatility of mining stocks

1 Dec 2003

The Indian miner is due to float in December near the peak of the cycle and valuation ranges are huge. That makes investors lives harder, but is par for the course for the sector, which can trade at between 0.5 and 2 times NAV over the cycle.