Post by Catdaddy on Nov 23, 2007 19:58:41 GMT -5
From The TimesNovember 24, 2007
BHP may be forced to find billions more in fight for rival miner
business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2933909.ece
David Robertson, Business Correspondent
BHP Billiton, the world’s largest mining company, will come under pressure next week to raise its £62.4 billion bid for Rio Tinto after an informal valuation priced Rio’s shares more than 18 per cent above the current offer.
It is understood that senior Rio executives have estimated its enterprise value at more than A$150 a share, or about £62. Its price in London rose 390p to £53.15 yesterday, up 20 per cent since BHP made its interest known two weeks ago. If shareholders agree with Rio’s internal estimates, BHP could be forced to add tens of billions of pounds to its bid.
A spokesman for Rio refused to comment yesterday. Its board has rejected BHP’s approach, which would create a mining behemoth with a market capitalisation of more than £150 billion, and will tell shareholders on Monday why it believes the bid is too low.
The defence seminar, to be held at the London Stock Exchange on Monday morning, will focus on the company’s portfolio of mines and pipeline of growth opportunities.
Tom Albernase, Rio’s chief executive, is understood to believe that both the stock market and BHP have undervalued the company’s assets. One of the areas he is likely to focus on during his presentation is uranium.
Rio is the world’s second-largest uranium producer but recent research by UXC, a consultancy, shows that its mines, which are overshadowed by larger iron ore and coal assets, could be significantly undervalued.
According to UXC, the resources of Cameco, the largest uranium producer, are valued at $15.9 a pound. Paladin Resources is valued at $17.10 per pound but Rio’s Energy Resources Australia is valued at just $6.2 per pound. Rio is also expected to outline expansion opportunities that are not yet costed into its share price, such as its coal reserves in Mongolia and new iron ore deposits at several sites in Australia.
A survey of mining analysts yesterday showed that the City also believes that BHP’s bid for Rio is too low. The analysts polled suggested that the bid would need to be sweetened by about 20 per cent to be taken seriously.
Julian Chillingworth, chief investment officer at Rathbone Investment Management, said: “I think we need to see a lot more on the table than we’ve got at the moment.”
Ray Chantry, an analyst with Bail-lieu Research in Australia, said: “The time has come for Rio to show off, reveal prospects and resources that have value but are not recognised by the market.”
A Rio spokesman said the company would demonstrate its value and growth prospects at Monday’s meeting. BHP said it would wait to hear Rio’s defence before commenting.
BHP may be forced to find billions more in fight for rival miner
business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2933909.ece
David Robertson, Business Correspondent
BHP Billiton, the world’s largest mining company, will come under pressure next week to raise its £62.4 billion bid for Rio Tinto after an informal valuation priced Rio’s shares more than 18 per cent above the current offer.
It is understood that senior Rio executives have estimated its enterprise value at more than A$150 a share, or about £62. Its price in London rose 390p to £53.15 yesterday, up 20 per cent since BHP made its interest known two weeks ago. If shareholders agree with Rio’s internal estimates, BHP could be forced to add tens of billions of pounds to its bid.
A spokesman for Rio refused to comment yesterday. Its board has rejected BHP’s approach, which would create a mining behemoth with a market capitalisation of more than £150 billion, and will tell shareholders on Monday why it believes the bid is too low.
The defence seminar, to be held at the London Stock Exchange on Monday morning, will focus on the company’s portfolio of mines and pipeline of growth opportunities.
Tom Albernase, Rio’s chief executive, is understood to believe that both the stock market and BHP have undervalued the company’s assets. One of the areas he is likely to focus on during his presentation is uranium.
Rio is the world’s second-largest uranium producer but recent research by UXC, a consultancy, shows that its mines, which are overshadowed by larger iron ore and coal assets, could be significantly undervalued.
According to UXC, the resources of Cameco, the largest uranium producer, are valued at $15.9 a pound. Paladin Resources is valued at $17.10 per pound but Rio’s Energy Resources Australia is valued at just $6.2 per pound. Rio is also expected to outline expansion opportunities that are not yet costed into its share price, such as its coal reserves in Mongolia and new iron ore deposits at several sites in Australia.
A survey of mining analysts yesterday showed that the City also believes that BHP’s bid for Rio is too low. The analysts polled suggested that the bid would need to be sweetened by about 20 per cent to be taken seriously.
Julian Chillingworth, chief investment officer at Rathbone Investment Management, said: “I think we need to see a lot more on the table than we’ve got at the moment.”
Ray Chantry, an analyst with Bail-lieu Research in Australia, said: “The time has come for Rio to show off, reveal prospects and resources that have value but are not recognised by the market.”
A Rio spokesman said the company would demonstrate its value and growth prospects at Monday’s meeting. BHP said it would wait to hear Rio’s defence before commenting.
