Billiton in £1.4bn Canadian copper takeover

Billiton, the mining company, made a bold move into the copper market yesterday, trumping a hostile bid for Rio Algom, a Canada-based producer, with a C$2.97bn (£1.4bn) agreed deal.

Billiton, the mining company, made a bold move into the copper market yesterday, trumping a hostile bid for Rio Algom, a Canada-based producer, with a C$2.97bn (£1.4bn) agreed deal.

The company said that the move delivered on its long-stated desire to gain a presence in the copper market, adding to its major interests in coal, aluminium and nickel.

Analysts cautioned, however, that the rival bidders, Noranda, another Canadian miner, and state-owned Chilean copper producer Codelco, may yet return with a higher offer.

Billiton said it would pay C$27 (£12.26) in cash for each Rio Algom share and assume the company's net debt of $900m (£608m). Noranda, backed by Codelco, had tendered C$24.50 a share in cash.

Billiton shares backtracked on the news as some investors fretted at what was seen as a very full price tag; Billiton's reduced room for further corporate moves in the wake of the Rio Algom deal, and mild earnings dilution next year.

Countering the negative reaction, one analyst noted that opportunities to acquire significant copper assets were few and far between, and Rio Algom's production levels were set to soar as new mines were brought into production.

"It seems to me to be quite a positive deal. It's a good strategic move," the analysts said. "You are buying future earnings as production rises from 180,000 tonnes now, to 500,000 tonnes in a few years."

Rio Algom's current output is centered on mines in Chile, Argentina and Canada. It is developing the promising Antamina copper-zinc project in Peru, which is due to start production towards the end of next year.

Billiton shares in London ended 10.25p lower at 300p.