Oz Minerals settles Xstrata takeover rumours

OZ Minerals dismissed rumours that Glencore Xstrata is preparing a takeover bid, stating it has received no contact from the Swiss giant.

Image courtesy of [jscreationzs] \ FreeDigitalPhotos
Image courtesy of [jscreationzs] \ FreeDigitalPhotos
The Mail on Sunday reported that Glencore had built a ”secret” 10% stake in OZ – which mines for copper and gold in South Australia – and was preparing to launch a full takeover soon.

In response to an Australian Stock Exchange (ASX) query with respect to the rumour, the company published a statement that it “has not received a substantial shareholder notice from Glencore nor has OZ Minerals been approached by Glencore in regard to any proposal”

The speculation sparked strong interest in OZ shares, which rose 6.7% in early trading on Monday as reported on Reuters but eased after OZ distanced itself from Glencore.

Under ASX rules, shareholders must disclose their ownership as soon as they own 5% or more of a company.

Experts were sceptical about the likelihood of a takeover, suggesting that such a move would be at odds with Glencore’s recently stated business strategy.

Glencore has recently opted to leave most of its undeveloped assets as they are, and focus instead on developing existing operations and bolt-on acquisitions.

Much of OZ’s value relates to the undeveloped Carrapateena deposit in South Australia, with its one operating mine – the nearby Prominent Hill – whose costs are rising as its mine life runs out

Wilson HTM analyst Cameron Judd said he did not expect Glencore to mount a full takeover for OZ. ”Never say never, but I don’t think it’s likely,” he said.

Mr Judd said the outlook for copper markets was generally strong and South Australia was a good place to mine, but buying OZ would be at odds with the cost reduction process, including the sale of copper assets that Glencore has under way.

”Glencore, or another entity with balance sheet strength, is more likely to emerge as a potential joint-venture partner at Carrapateena, and that would be a scenario I think OZ Minerals would be happy with too.”

Carrapateena is considered highly prospective, but development is several years and many millions of dollars away.

OZ has been seen as a likely acquirer of assets in recent years, given it has long boasted a cash pile of almost $1 billion. However, it has been reported that cash pile has gradually been eroded by the Carrapateena purchase and dividend payments to the point where it stood at just $432.9 million in the August results.

OZ shares ended at $4.43 on Monday, up two cents or 0.45%, taking its market value to $1.34 billion.

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