Anglo rallies on takeover, SA policy talks

André Janse van Vuuren | Thu, 02 Feb 2012 17:40

[miningmx.com] -- ANGLO American could be in the sights of a combined Xstrata/Glencore entity, analysts said, although some caution it was too early to predict such a move.

Anglo American’s shares closed at R340.63 on Thursday – the highest since May 2011 – up 3.35% for the day. It traded up 4.05% at one stage. The rally came after Xstrata announced it had been approached by Glencore for a possible merger of equals.

One analyst, who asked to remain anonymous due to company policy, said a merger between Xstrata and Glencore could open the way for a possible new bid for Anglo American. Referring to Xstrata’s unsuccessful approach for Anglo American in 2009, also for a so-called merger of equals, he said it was always expected that Xstrata would return in the future.

The view was supported by mining analyst Peter Major, who said that although a tie- up between Glencore and Xstrata was no sure thing, he could envision a combined entity making a bid for Anglo American within 12 months.

“Anglo is attractively priced [compared to other diversified miners],” said Major. “Neither Glencore nor Xstrata has the quality assets that Anglo has.”

Similar to the situation at the time when Xstrata made its earlier bid for Anglo, Major said Anglo’s management team was vulnerable, given the miner’s dispute over the Los Bronces mine in Chile with that country’s state-owned miner Codelco, as well as delays and cost escalations at the group’s Minas Rio iron ore project in Brazil. “Things in Chile are not looking pretty at all,” Major said.

Stephen Meintjes of Imara SP Reid cautioned that any takeover bid for Anglo American may receive stiff opposition from competition authorities; a few shared by Abercrombie Investment Management’s Liston Meintjes.

“I think a few people are getting ahead of themselves,” said Liston Meintjes. “If you want to know why Anglo is rallying, then look at the report on nationalisation,” he said, referring to a Business Day article that the ruling ANC is about to dismiss nationalisation as an option for state involvement in the mining industry.

Byron Lotter of Vestact Securities said the sentiment for all resources stocks has improved in recent days, following encouraging economic data from Asia. A purchasing managers index for China, released on Wednesday, showed that a downturn in manufacturing in that country might be bottoming out – easing fears of a hard landing.

“I don’t buy the theory of a hard landing or even a soft landing,” Lotter said. “China still has so many people that need to be urbanised who, in my view, the growth will just continue.

“The valuations [of commodity stocks] are very cheap and sentiment is picking up.”