Rio Tinto Averts Takeover Bid From Glencore but For How Long?
Rio Tinto has dodged a bullet.
The UK-based company rejected a $160 billion offer to merge with Glencore, declining to form the industry’s largest mining company.
“The Rio Tinto board, after consultation with its financial and legal advisers, concluded unanimously that a combination was not in the best interests of Rio Tinto’s shareholders,” the company said in a statement.
According to Business Review Australia, the company engaged with Macquarie Group to lead the defense against the potential takeover.
“The partnership is geared towards helping Rio Tinto defend against merger talks, as sources close to the company believe a “merger of equals proposal” greatly undervalues the mining company, and that there is no support within Rio’s management for the proposal.”
The deal, which would have been the biggest in mining history, would have surpassed BHP Billiton in terms of coal, iron ore and copper production. But the timing of Glencore’s takeover bid is no coincidence.
Rio, which gets about 80 percent of its sales from iron ore mines in Western Australia, is now left struggling with declining prices for the metal. Iron ore accounts for roughly 64 percent of the company’s net value.
“The pressure is on Rio now,” Chris LaFemina, a mining analyst at Jefferies LLC, said in a report. “If Rio management does not deliver material capital returns to shareholders, as promised, or if the iron ore price sharply falls next year, Rio could become much more vulnerable.”
Glencore’s chief executive Ivan Glasenberg will have to continue salivating over the possible mega-merger as the Swiss-based commodities trader will have to wait at least six months before pursuing a deal under UK takeover law.
Lynas revenue jumps 21% as rare earth prices jump
Australian miner Lynas Rare Earths posted a 20.6% rise in revenue in the March quarter as selling prices for the key metals it mines hit record highs amid strong demand, particularly for neodymium and praseodymium (NdPr).
NdPr is used in magnets for electric vehicles and windfarms, in consumer goods like smartphones, and in military equipment such as jet engines and missile guidance systems.
The company said it plans to maintain production at 75% however, as it seeks to continue to meet covid-19 safety protocols and grapples with shipping difficulties. Shares in Lynas fell 6.1% after the results.
“They have faced a few logistics issues, and it would be good to know when they are going to start lifting their utilisation rates a bit,” said portfolio manager Andy Forster of Argo Investments in Sydney.
“Pricing has been pretty strong although it may have peeled back a bit recently. I still think the medium, long-term outlook is pretty good for their suite of products.”
Lynas post ed revenue of A$110mn ($85.37mn) for the three months to the end of March, up from A$91.2mn a year earlier as prices soared.
It said its full product range garnered average selling prices of A$35.5/kg during the March quarter, up from $23.7 in the first half of the financial year. “While the persistence of the covid crisis, especially in Europe, calls for careful forecasts for our business ahead, we see the rare earth market recovering very quickly,” said Lynas, the world’s largest rare earths producer outside China.
Freight demand has spiked during the pandemic, while the blockage of the Suez Canal in March delayed a shipment to April.
Lynas’ output of 4,463 tonnes of rare earth oxide (REO) during the quarter was marginally lower than 4,465 tonnes from a year earlier.