An everyday story of simple mining folk. Or, "Who cares? It’s only money."


A few years ago, a relatively small Swiss based mineral mining company (coal etc.) called Xstrata, felt that it needed to expand its operations into the metals mining business. To this end they made bids for a number of smaller companies, but found themselves continually thwarted in their efforts by their much larger rivals; BHP Billiton, Rio Tinto, etc. Undaunted they bided their time, continued to watch the market and eventually managed to purchase a 20% stake (costing a not inconsiderable C$1.67bn) in Falconbridge, a Canadian Nickel mining company. Falconbridge, however, fearing this to be a preliminary move toward a take over attempt (they wanted nothing to do with Xstrata) decided to forestall this possibility by forming an alliance with Inco, another Canadian Nickel mining company. As it so happens though, Inco are themselves not without suitors.

Both Teck Cominco (Canadian) and Phelps Dodge (American) are keen to acquire Inco, but whereas the former is only interested in Inco itself, the latter was happy to take on the combined Inco/Falconbridge business. (Indeed, as I understand it, Phelps Dodge was assisting with the costs incurred by Inco in their pursuit of Falconbridge). It came as little or no surprise then that the three companies announced a joint US$56bn venture.

This joint venture would have given Xstrata something like C$450m profit on their investment; enough for most analysts to believe they would simply take the money and run. Xstrata, however, were not for giving up. They improved their offer; Phelps Dodge/Inco/Falconbridge improved theirs; Xstrata then raised the stakes again. That was enough. Time ran out for acceptance of the PD/I/F offer, Inco have now pulled out of the deal with Falconbridge (leaving the way clear for Xstrata) with Teck Cominco and Phelps Dodge now left to fight over Inco . . . or so we thought.

At the eleventh hour a completely unknown player has joined the fray; a Brazilian company called Companhia Vale do Rio Doce. They have tabled an all cash offer of C$86 per share which completely eclipses the bids from Teck Cominco (C$78.50 per share) and Phelps Dodge (C$79.83 per share); the latter two also being cash/share bids rather than all cash. It’ll be interesting to see where we go from here.



N.B.
Newer members might be wondering why it is I’m so interested in some somewhat obscure foreign mining companies – albeit extremely rich obscure foreign mining companies. Quite simply, the company I work for used to belong to Inco (part of the Alloys Division), but was sold in order for them to finance the development of their new mine at Voisey’s Bay (Canada). This sale, however, is something of a saga in its own right; perhaps a tale for another time.