Miners Anglo American and Xstrata in £41bn merger talks

XSTRATA AND Anglo American, two of the world’s biggest listed mining groups, yesterday confirmed that they are in preliminary discussions about a merger, in a move that analysts have predicted could yield annual savings of $750 million.

In a statement released yesterday, Anglo American, which owns the Lisheen lead and zinc mine in Tipperary, said talks were “at a very preliminary stage, and there is no certainty that any transaction will be forthcoming”. It did not detail the terms of a possible deal.

Xstrata, the largest exporter of coal used by power plants, has proposed a “merger of equals” with Anglo American to gain access to iron ore mines and control of the world’s biggest platinum producer. “A merger of these two world-class companies with complementary assets is highly compelling” and would provide “enhanced scale and financial flexibility to fund future growth,” Switzerland-based Xstrata said in an statement yesterday.

Xstrata chief executive Mick Davis wants to combine with Anglo to make cost savings from joining operations and continue an acquisition spree in which the company has spent more than $28 billion in the past six years on nickel, copper, coal and platinum assets.

Xstrata is the majority shareholder in a joint venture with Irish group Minco that holds prospecting licences for lead and zinc at Pallas Green in Limerick.

A combination of the two would create a company with a market value of about £41 billion.

A tie-up “makes a huge amount of sense”, said Michael Rawlinson, an analyst in London. “The problem is that Anglo American is being very resistant to the idea.” – (Bloomberg)