Australian boost for Xstrata in WMC bid battle

The Australian government yesterday cleared the A$8.4bn (£3.5bn) bid from London-listed Xstrata for WMC Resources.

The Australian government yesterday cleared the A$8.4bn (£3.5bn) bid from London-listed Xstrata for WMC Resources.

The news prompted speculation that the clearance could lead to other bidders emerging. WMC, which has twice rebuffed Xstrata, has openly asked for other interested parties to come forward.

The decision by Australia's Treasurer, Peter Costello, not to block the bid on national interest grounds ended months of speculation over whether Xstrata would be allowed to pursue WMC , which sits on 38 per cent of the world's uranium reserves. WMC shares rose more than 3 per cent to a record A$7.72 on the news. Mr Costello, who consulted Australia's Foreign Investment Review Board, disagreed with political critics of Xstrata's bid, who argued it was in the national interest for WMC to remain in Australian hands because of the uranium reserves at its giant Olympic Dam project in the remote southern outback.

In 2001, Mr Costello knocked back a bid by Royal Dutch/Shell to buy Woodside Petroleum, citing concerns that billions of dollars in export revenues from vast undeveloped offshore gas fields were at stake. "I don't think there is a risk in this particular bid that Australian resources will be underdev-eloped," he said yesterday.

Rob Craigie, an analyst at FW Holst in Australia said: "If any of the possible other bidders were thinking of making an offer, then they would have waited until the government made its decision."

Analysts have suggested a long list of suitors, including Canadians Cameco and Inco, South Africa's Anglo American and Brazil's Companhia Vale do Rio Doce. London-listed miners Anglo American, BHP Billiton and Rio Tinto have also been mentioned.

Tony Robson, an analyst at Global Mining Research, said: "This clearly opens up the prospect of competing bids by other foreign mining companies, but it is still set by the price of WMC stock, and whether you can afford an A$8.5bn investment [required in the Olympic Dam site]."

Xstrata is bidding for WMC to get its uranium and nickel mines and double its copper production.