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Posts Tagged ‘control’

Rio Tinto Assumes Control of Riversdale

April 12, 2011 Comments off

“Rio Tinto said Friday it has assumed control of Riversdale Mining Ltd., as its interest in the Africa-focused coal producer rose above 50%, and could increase further before the takeover offer closes April 20. Riversdale has already appointed three Rio Tinto nominees to its board, including energy division Chief Executive Doug Ritchie, and Rio Tinto said other appointments are expected to follow.

‘The new Riversdale board will reflect our majority shareholding and help clear the way for the development of Riversdale’s assets as quickly as possible,’ Mr. Ritchie said in a statement.”

Source: Wall Street Journal, April 8 2011

Observations:

  • Rio Tinto managed to secure control of Riversdale in about 4 months time, the first approaches made in December. For some time an Indian state-backed coal consortium was looking at making a bid, but no competing bids were ever made.
  • The offer deadline at A$16.50 per share is extended to April 20th. Any shareholder that did not yet commit shares can decide to sell at this price up to next Wednesday. As a result Rio Tinto will end up with slightly more than 50% of the shares.

Implications:

  • The resulting shareholder structure is not unfavorable to Rio Tinto. It has full control over the assets, but at the same time can count on support from Tata for supply agreements. In the current configuration only CSN might not be very satisfied with the change of control. Time will teach whether or not CSN management will try to sell the stake.
  • In earlier stages Rio Tinto was reported to want to replace Riversdale’s management. Most likely the appointment of several directors is used as a means to get full understanding of the company, after which management changes will be made.

©2011 | Wilfred Visser | thebusinessofmining.com

Vale: Roger Agnelli vs. Dilma Rousseff

March 28, 2011 Comments off

Sources: Barclays Bradespar Analyst Report Nov. 2010, Vale SEC Filing FY2010

Observations:

  • Dilma Rousseff appears to have won the battle to replace Vale’s CEO Roger Agnelli, as various Brazilian and international newspapers are reporting a more government-minded chief will be appointed instead of renewing mr. Agnelli’s contract.
  • As displayed above the government has strong control over the world’s largest iron ore miner. Valepar S.A., the controlling shareholder, is 49% owned by state pension funds and the government has large influence on two of the three other major shareholders: BNDES, the state development bank, and Bradespar, a daughter of Brazil’s second largest private bank.
  • Key reason for the Brazilian government to push for replacement of mr. Agnelli is the conflict of interests between the company’s shareholders and the Brazilian government. Vale focused on cost cutting in the crisis while the government would have liked the company to keep employment high; Vale had ore carriers build in Asia, while the government would have like to have domestic shipyards build the ships; Vale tries to minimize taxes and royalties paid, while the government tries to maximize revenues.

Implications:

  • As long as iron ore prices stay high the change of leadership is not likely to have a major impact on Vale’s international behavior. The company will likely get more closely involved in Brazilian steelmaking, potentially allying with Gerdau in development of domestic projects. If prices drop, expansion focus will be more centered on Brazil to please the government.

©2011 | Wilfred Visser | thebusinessofmining.com

ArcelorMittal sweetens offer for Baffinland

January 4, 2011 Comments off

“ArcelorMittal has again sweetened its friendly offer for Baffinland Iron Mines in an escalating battle for control of one of the world’s biggest undeveloped iron ore deposits in Canada’s high Arctic. The Luxembourg-based steelmaker said on Friday that it was offering C$1.40 for each Baffinland share, valuing the company at C$551m. Gaining control of the deposit would enhance ArcelorMittal’s access to a key raw material at a time of growing competition for such resources.

Its bid equals the latest offer by a group backed by Energy and Minerals Group (EMG), a US private-equity firm. However, ArcelorMittal is bidding for all Baffinland’s shares while EMG would buy only 60 per cent.”

Source: Financial Times, December 31 2010

Observations:

  • ArcelorMittal aims to be 75% self-sufficient in iron ore supplies, up from 46% in 2007.
  • ArcelorMittal Mines Canada already operates two large open-pit mines: Mont-Wright and Fire Lake. The experience with arctic mining gained here will help to operate the Baffinland mines.

Implications:

  • ArcelorMittal reckons that the shareholders will prefer to sell the shares at the current premium instead of holding on to the shares with EMG holding 60% of the shares, which would reduce liquidity of the trade.
  • If the company wants to obtain full ownership of Baffinland, it will have to convince EMG to sell its 10% stake. As EMG is looking for full control over the company too, it is likely to give up its stake if ArcelorMittal wins the bidding war.

©2011 | Wilfred Visser | thebusinessofmining.com

Ivanhoe escalates Rio Tinto dispute

July 15, 2010 1 comment

“A dispute between Rio Tinto and Canada’s Ivanhoe Mines over a Mongolian copper and gold mine escalated on Wednesday when the Vancouver-based company suggested it was opening the door to “third-party strategic investors

Ivanhoe said its board voted on Tuesday to terminate a clause in a 2006 pact between the two companies that prevents Ivanhoe from issuing more than 5 per cent of its shares to third parties.

The move means Rio, the financier of the Mongolian mine at Oyu Tolgoi near the Chinese border, faces the threat of dilution of its holding in Ivanhoe or the possibility that another miner may gain a foothold on the project. Rio said it was ‘very confident of its existing rights under the private placement agreement with Ivanhoe [from 2006]’. However, on Monday, the Anglo-Australian miner launched arbitration against Ivanhoe over an earlier complaint.”

Source: Financial Times, July 15, 2010

Observations:

  • Rio Tinto is owning part of the Oyu Tolgoi project, one of the richest undeveloped copper deposits in the world, via its stake in Ivanhoe.
  • A special agreement between Rio and Ivanhoe enables Rio to increase its take in the project by exercising warrants to increase Ivanhoe ownership. However, the agreement prevents Rio from obtaining a majority stake in the Mongolian project until 2011.

Implications:

  • Rio Tinto clearly wants to gain control over the development and operation of the new copper mine, which will enable the company to provide secure access to copper for the Chinese market. The company will try to buy additional shares of the project as soon as possible after the agreement with Ivanhoe expires.
  • Ivanhoe management will be driven by hopes to retain as much control as possible over the project and at the same time tries to increase the value of its stake and shares to gain more from Rio’s attempts to buy control. Inviting other companies to buy parts of Ivanhoe will increase the price Rio will eventually have to pay to buy a majority share.

©2010 – thebusinessofmining.com