INDABA: Glencore, Xstrata Merger Could Spur W Africa Iron Ore M&A-Standard Bank

A merger between Anglo-Swiss miner Xstrata PLC (XTA.LN) and commodities titan Glencore International (GLEN.LN) could be the catalyst for more merger and acquisition activity in the west African iron ore space, says Standard Bank's head of mining and metals Monday.

Glencore and Xstrata both have significant assets across Africa but a tie-up between the two would still leave them deficient in iron ore overall.

"They won't have a huge presence in iron ore, so they might try to do something in iron ore in west Africa," Rajat Kohli told Dow Jones Newswires on the sidelines of the mining Indaba here. He added that the deal would also generally put more focus on Africa where its "geological postcode is relatively underdeveloped."

There has been a recent rise in deals with mid-tier iron ore developers in west and central Africa. In January, South African diversified mining company Exxaro Resources Ltd. (EXX.JO) said it would pay up to A$338 million (US$348 million) in cash for African Iron Ltd. (AKI.AU), an Australian-listed company developing an iron-ore mine in the Republic of Congo.

The three major iron ore producers Vale, Rio Tinto and BHP all are developing assets in west Africa as well as steel titan ArcelorMittal (MT). Glencore already has an offtake agreement with London Mining PLC (LOND.LN) which is mining iron ore in Sierra Leone.

The merged entity wouldn't reach the scale or size of the top three iron ore producers but it could incrementally build up capacity by picking up west African assets, Kohli said.

-By Devon Maylie, Dow Jones Newswires; [phone], [e-mail]