Zug, Switzerland — MININGREVIEW.COM — 01 October 2008 – Swiss-based Xstrata plc says that – in light of the current unprecedented uncertainty in the financial markets, as well as the proposed financing terms around such an acquisition – Xstrata has no current intention to make an offer for Lonmin – the world’s third-largest platinum producer.
On 6 August 2008, Xstrata announced a possible US$10 billion offer for Lonmin under Rule 2.4 of The City Code on Takeovers and Mergers. On 3 September 2008, the Panel Executive announced that Xstrata must – by 5.00 p.m. London time on 2 October 2008 – either announce a firm intention to make an offer for Lonmin, or announce that it does not intend to make such an offer.
Xstrata plc chief executive Mick Davis, commented: “Today’s announcement is made against a background of extreme volatility and uncertainty in the financial markets. The current lack of clarity and certainty regarding the future availability of credit introduces significant risks into the financing package available to Xstrata, in respect of the requirement in the proposed financing terms to refinance a substantial portion of the debt funding within 12 months. As a result, Xstrata has concluded that it will not proceed with an offer for Lonmin within the deadline set by the Panel Executive,” he added.
But Davis went on to say: “While the current instability of the financial markets has created an environment of great uncertainty, it does not change the fundamental robust nature of Xstrata’s cash-generative portfolio and profitability. Nor does it change our long-held view that commodity prices will remain elevated over historical averages in the medium term, albeit with some short-term weakness,” he continued. “This view is underpinned by the secular up-shift in demand that is driven by the industrialisation and urbanisation of China and emerging Asian markets, together with the real and ongoing constraints which exist in effecting sustained increases in supply,” said Davis.
“I remain confident that Xstrata’s strategy to grow organically and through acquisition to create value for our shareholders remains intact and as relevant as ever,” he added.
Xstrata said it reserved the right to acquire Lonmin shares, subject to and in accordance with the requirements of the Code and other applicable regulations. “For the purposes of Rule 2.8 of the Code, Xstrata reserves the right to make or participate in an offer for Lonmin (and/or take any other action which would otherwise be restricted under Rule 2.8 of the Code) within the next six months following the date of this announcement,” it concluded.