China deals seen among Australia WMC defence options
Australian miner WMC Resources Ltd. would likely consider tie-ups with resource hungry Chinese companies as a defence against a A$7.4 billion ($5.7 billion) takeover bid from Xstrata Plc., analysts said on Friday.
Chinese companies are showing increasing interest in pursuing offshore investments in projects across a range of commodities.WMC Resources owns the Olympic Dam project in South Australia, the world's eighth largest copper resource and largest uranium resource, and is the third-largest producer of nickel in concentrate.
Analysts said WMC was likely to be pursuing a number of options for the company, after late last month rejecting Xstrata's A$6.35 a share offer as too low.
Olympic Dam has had some operational difficulties, but Chinese investors driven by strategic supply needs could find a joint venture or equity investment in WMC's strong resource base particularly attractive, said Perennial Growth Management partner Ken West.
"It certainly is a possibility," he said. "They are not really driven domestically by returns on capital, they are driven socially by trying to secure high-quality production."
WMC Resources Ltd. Chief Executive Andrew Michelmore will visit China next week, coinciding with an industry conference in Beijing, prompting speculation that discussions on a range of possibilities could be on the agenda.
"It is in their interests to court as many people as they can," Commonwealth Securities analyst Peter Harris said.Olympic Dam is forecast to produce at least 220,000 tonnes of copper in 2004 and more than 4,000 tonnes of uranium, and the company is studying a A$4 billion expansion that could increase output to 500,000 tonnes of copper and 15,000 tonnes of uranium.
Analysts said joint ventures in Australian projects appeared to be the more likely path for Chinese companies, but equity investments in companies were also a possibility.
(From Reuters, November 12, 2004)
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