Xstrata raised its stake in Lonmin to 25 per cent yesterday (1st October) in an attempt to prevent other bidders from launching a takeover of the world's third-largest platinum producer.

Having scrapped its proposed $10 billion bid for the company earlier in the day due to the current turbulent financial landscape, Xstrata secured an additional 14.2 per cent stake at a cost of around $784 million.

The move appears to indicate that another bid is in the offing, although under UK takeover laws any deal emerging in the next six months would have to be approved by Lonmin.

Michael Rawlinson, Head of Mining, Resources and Energy at London-based brokers Liberum Capital, said: "Xstrata are not walking away, but have effectively locked out a competing bid at an attractive average price. We expect Xstrata to come back and bid."

Production at Lonmin has suffered considerably in recent times as a result of a number of factors, such as operational difficulties, safety concerns and the fallout from the Eskom power crisis.

However, Xstrata has a proven track record of improving efficiency and believes that it can restore production levels at Lonmin's smelters and mines in South Africa to the levels of two years ago.

Chief Executive Mick Davis said: "We continue to believe the medium and long-term fundamentals of platinum are robust and that the structure of the platinum industry remains attractive.''



Source:

Xstrata Raises Lonmin Stake to 25%, Blocks Other Bids (01/10/08)
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