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Xstrata CEO Mick Davis not interested: ditches Lonmin bid

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 1, 2008

Anglo-Swiss mining giant Xstrata PLC Xstrata on Wednesday said it was dropping a bid for British platinum producer Lonmin in view of tightening credit and the ongoing financial turmoil. “Today’s announcement is made against a background of extreme volatility and uncertainty in the financial markets,” said Mick Davis, the group’s chief executive.

“The current lack of clarity and certainty regarding the future availability of credit introduces significant risks into the financing package available to Xstrata,” he added.

Xstrata had in August sought to expand its global reach through a bid worth more than six billion euros (nine billion dollars) for Lonmin, but the British group turned down the takeover, saying that it undervalued its business. Xstrata was then asked by the British Takeover Panel to announce its intention on the offer by October 2. While dropping the bid, Xstrata said its strategy to grow organically and through acquisitions “remains intact and as relevant as ever.”

The Swiss mining company is 34% owned by Glencore International AG, the world`s largest commodity trader, and is the biggest exporter of coal used by power stations. It also mines copper in South America, nickel in Canada, zinc in Australia and smelts ferrochrome in South Africa. Mr Davis said Xstrata could restore Lonmin`s production to the level seen two years ago. Output at Lonmin`s South African mines and smelter shrank because of strikes, safety stoppages and equipment shutdowns. The price of platinum has declined 35% since Xstrata`s proposal.

Lonmin had resisted the hostile takeover approach made by Xstrata in August, urging shareholders to hold onto their stock because the bid “fundamentally undervalues the Company’s unique assets, resources and reserves.” Xstrata’s potential hostile offer for Lonmin PLC, the world’s third-largest platinum producer, has been valued at between $9 billion to $10 billion. Xstrata in August proposed to acquire Lonmin for about 33 British pounds a share. But Lonmin rejected the offer, saying the offer undervalued the company’s assets.

Banking sources said last month that Xstrata had approached 22 banks to make commitments for a $15bn loan to fund the Lonmin takeover and refinance existing debt.

Mick Davis:

1958, is the Chief Executive of Xstrata. Mr Davis was appointed as Chief Executive of Xstrata AG in October 2001, and was appointed to the Board of Xstrata in February 2002. Previously, Mr Davis was Chief Financial Officer and an executive director of Billiton Plc, appointed in July 1997, and served as Executive Chairman of Ingwe Coal Corporation Limited from 1995. He joined Gencor Limited in early 1994 from Eskom, the South African state-owned electricity utility, where he was an executive director.

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