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Xstrata (LSE:XTA) is making news on several fronts today. With the news of a potential merger with Glencore International already on the table, significant developments are happening involving Canadian operations and Middle Eastern investors. With these stories breaking around midday, there has been little time for market reaction. Nonetheless, XTA shares were up 11.50p to 1,206.00p.
The News from Canada
Xstrata Coal has announced that it is seeking an operator to take over its 75% share in the Donkin Coal Project. What is startling about the news is that the Cape Breton project is in its inception, with Nova Scotians looking forward to 300 new jobs within the next two years. The impending merger of Xstrata and Glencore, which would create the fourth largest natural resources entity, is cited as the reason for the pullout as the new company, Glencore Xstrata will shift its focus to mega-projects. Peter Freyberg, CEO of Xstrata Coal, said “Over the past decade, Xstrata Coal has evolved, as has our business strategy, and core to that is a focus on larger-volume mining complexes.” Peter Akerley of Erdine, the 25% partner in the project observed that “We recognized for quite some time now that Xstrata has been growing into a different company than when they first arrived in Nova Scotia.”
The News from the Middle East
The Qatar Investment Authority has been increasing its stake in Xstrata, investing $2.7 million to increase its stake in the company from 3% to 7%. The purchases began in early February when the potential merger of Xstrata and Glencore was announced. The Authority has purchased shares on almost a daily basis during the month of April. The move by Qatar raises the question of what their intentions are. In order to complete the merger, a minimum of 75% of the shareholders other than Glencore must approve the deal. As the Qatar stake increases, some observers feel that the sovereignty will use its position to block the deal. With a 7% stake, this may be enough shares as both Standard Life and Schroders & Fidelty, owners of 16% & 4.8% respectively have already indicated that they might reject the merger. On the other hand, some think that Qatar is in it for the long haul, expecting to reap major benefits from having a larger stake in Glencore Xstrata. A statement from Ahmed al-Sayed, the QIA CEO, gave no real insight into the fund’s intentions, but helped to add to the mystery: “We should always be active. To be passive is not healthy. Our intention will always be to add as much value as possible and to improve the company we invest in.”
Company Spotlight
Xstrata is one of the world’s largest mining companies, with more than 70,000 employees in over 20 countries. Xstrata Alloys is one of the world’s largest producers of ferrochrome and vanadium. Xstrata Coal is the world’s largest exporter of seaborne thermal coal. Xstrata Copper is the fourth largest producer of copper. Xstrata Nickel and Xstrata Zinc are world leaders in the production of nickel, cobalt, and zinc.
References
↑ Official Company History
↑ Halifax Chronicle Herald
↑ Nasdaq Midnight Trader
↑ Trade Arabia
↑ Official Company Information
