With Xstrata stock up 9 per cent in London, the fog floating across the entire London-listed mining sector on Thursday began to clear.
It is now widely accepted that on Wednesday, while explaining the bolt-on acquisition of Australian coal group Resource Pacific, chief executive Mick Davis quite deliberately put the business he has built up for sale.
Mining executives, fund managers and analysts attending a presentation down under were handed a 400-page document, detailing what Xstrata has become after little more than five years as a listed company – moving from a market capitalisation of £2.2bn to £33bn in a spectacular flurry of deals.
“He was saying – look here, this is your due diligence,” one of those present tells FT Alphaville, adding:
What Davis has decided is that if everyone is a buyer post Rio/BHP, then we are sellers.
That came as awkward news to many prop desks, hedge funds and other professional traders, who thought Xstrata’s response to Rio Billiton would be for Xstrata to try and buy Anglo American – not, crucially, the other way around.
The discount applied to Xstrata’s stock has evaporated as a result.
Meanwhile, sources indicate that Brazil’s Vale, known until last week as CVRD, has indeed hired Lehman Brothers to evaluate a bid for Xstrata, which in turn is taking advice from Merrill Lynch, and also possibly JPMorgan Cazenove. Yet while acknowledging the Brazilians’ ambitions, there are some in the Xstrata camp who continue to argue that the best deal on paper – certainly in terms of synergies – remains with Anglo American.
Those involved say there are talks going on in all directions, but insist these have not yet advanced to a point where the market needs to be updated. The Takeover Panel were believed to be examining the matter mid-afternoon on Thursday.
So speculate on.