Xstrata seeks £650m funds from London listing

Xstrata, the Swiss natural resources group, unveiled plans yesterday to raise £650m by seeking a London listing as it signalled its intention to become a global mineral player.

The move came as the tightly held Xstrata agreed to buy the coal assets of Glencore, the private Swiss commodities group and its major shareholder, for $2.5bn (£1.8bn) in cash and stock. The London flotation, scheduled for the end of March, is expected to value the Swiss company at just below £2bn.

Mick Davis, the newly appointed chief executive, said that a London listing would give Xstrata a platform to grow from and provide investors with increased liquidity.

"This transaction puts us on the playing field, whereas before, Xstrata was not on the playing field," Mr Davis said. "Our ambition is to grow the company into a position where we have very significant critical mass and we can tackle any mining or metals project that comes our way.

The Swiss group will use the London offering, bank loans and assumed debt to pay for Glencore's 25 Australian and South African coal mines. Glencore, which was established by the former fugitive financier Marc Rich, will increase its 38.5 per cent stake in Xstrata to 40 per cent as part of the deal.

Glencore had intended to list Enex, its Australian coal business, on the Australian Stock Exchange last year, but shelved the float because the US terror attacks depressed the market for new share issues.

Xstrata's move into coal followed the purchase of Asturiana de Zinc last year, which added to the Swiss group's existing ferrochrome and vanadium operations. The London listing will help Xstrata to de-leverage its highly geared balance sheet.

Mr Davis, who joined as chief executive last October from South Africa's Billiton, said the group saw opportunities to grow all its existing businesses as well as diversifying further.

Analysts said Xstrata would trade at a significant discount to giants Rio Tinto and BHP Billiton.