Anglo seals £1.2bn agreed deal for North but fears Rio will counterbid

Anglo American, the world's largest goldminer, yesterday won a recommendation from North, the Australian miner, for a A$3.1bn (£1.2bn) offer for the group, but said it expected rival Rio Tinto to counterbid.

Anglo American, the world's largest goldminer, yesterday won a recommendation from North, the Australian miner, for a A$3.1bn (£1.2bn) offer for the group, but said it expected rival Rio Tinto to counterbid.

Anglo offered A$4.20 per share, after North dismissed Rio's A$3.80 bid last month. Rio said it would decided whether to raise its offer after North had explained its move. Monday marks the close of the 30-day deadline for North's response.

"Obviously we hope Rio will back off. But I don't think we're at the end of this," said Tony Lea, Anglo's finance director. "It all depends on what they come back with."

Shares in Rio fell 18p to 1,060 while Anglo tumbled 123p to 3,282p as analysts predicted Rio would top Anglo's bid, forcing Anglo to come back with a fresh offer. Anglo indicated it might pay up to A$4.60 per share.

"Rio can't afford not to come back with a counterbid. If it loses this, people will look back in a year's time and say Rio was timid," said Peter Davey, analyst at SG Securities.

North yesterday issued a draft of its response to Rio, saying Grant Samuel, an independent expert, had valued it at up to A$5.09 per share. It said North would be worth still more to Rio on account of the synergies in developing North's prized West Angelas iron mine in Western Australia. Rio has a railway line that passes by the mine. SG said a bid from either Anglo or Rio of more than A$4.60 a share was excessive.

Anglo has taken a collaborative approach to its bid, enlisting the support of North's Japanese customer base which fears Rio would gain too much pricing power by buying North.

Anglo said its bid had the full backing of Mitsui & Co, Nippon Steel Corp and Sumitomo Metal Industries which are partnered with North in a join venture called Robe River Iron Ore Associates. They have both agreed to purchase more ore from an Anglo-North combine.

Rio said it was talking to North's customers too.

"We wouldn't go hostile. Rio has an understanding of the iron industry that we lack so we need the benefit of detailed discussions [with North]," said Mr Lea.

In pursuing an agreed deal, Anglo is likely to have had access to North's books, including the latest geological surveys of the West Angelas project. A Rio-North merger would lift it from third to second place, after Companhia Vale do Rio Doce of Brazil, among the world's iron ore producers. If Anglo wins it will be the world number four.