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Titanic struggle for control of global raw materials market

Thursday, December 27th 2007 - 20:00 UTC
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Mining giant Rio Tinto continued to defend itself against an unsolicited offer from larger rival BHP Billiton on Thursday, saying it had greater potential as a standalone company while rumors of possible Chinese offers re-emerged.

In a letter to shareholders that was posted on the Australian Securities Exchange, Rio Tinto Chairman Paul Skinner said the company's outlook was "exceptional," spurred by rising demand for resources from developing countries. "As you may be aware, BHP Billiton recently made an unsolicited approach to acquire Rio Tinto, which your board unanimously rejected as it significantly undervalued Rio Tinto and its prospects," Skinner said. Skinner pointed to Rio Tinto's prospects in iron ore, copper and aluminum, saying the company was well positioned to "capture strong growth in demand in the developing economies, including China and India". Beijing, which fears the impact of a BHP-Rio Tinto conglomerate for the global minerals' market, recently authorized state corporations to consider three strategies for a Rio Tinto offer: a domestic consortium; an agreement among domestic and foreign corporations or buying shares in the open market, according to the South China Morning Star. Skinner also said he was pleased that Britain's takeover regulator had agreed to give BHP Billiton until February 6 to either formalize its proposal to buy Rio Tinto for around 130 billion US dollars or say it is not interested. The move comes after Rio Tinto, which is headquartered in London but also listed in Australia, invoked Britain's so-called "put up or shut up" laws, which stipulate that a company subject to a potential bid can request that a time limit be imposed on would-be buyers to clarify their intentions. The British deadline now forces BHP to come up with a formal offer or drop its bid altogether. If it does not meet the deadline, BHP must wait another six months from February 6 to make a fresh proposal. BHP Billiton accounts for around 15% of world iron ore sales, while Rio Tinto is responsible for 24%, which would put the combined company at 39%. Global steel makers fear the two companies operating as a single unit would have too much influence over raw materials prices. Rio Tinto is only behind Brazil's Vale in iron ore but is the world's largest aluminum producer. Marius Kloppers, BHP' CEO has insisted in promoting what he describes as the "irresistible synergies" of a potential alliance with Rio Tinto underlined by the neighboring iron ore operations in Australia and the joint undertaking in the world's largest copper mine, Escondida in Chile.

Categories: Economy, International.

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