Anglo rallies on takeover, SA policy talks

[] — 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

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.’