Xstrata, the world’s largest exporter of thermal coal, is seeking more acquisitions to create an iron ore division after making a $514 million bid for Sphere Minerals.
“We would like to grow our business so it ultimately becomes its own business unit within the Xstrata group when we get to critical mass,” Peter Freyberg, chief executive of the Switzerland-based company’s coal business, said today in an interview in Sydney.
Establishing an iron ore unit will help Xstrata compete against bigger rivals BHP Billiton and Rio Tinto, whose ore divisions generate their biggest sales by value.
Mr Freyberg wants to buy Sphere for its three iron ore projects in Mauritania and has agreed to spend as much as $US106 million ($105 million) on an initial study of the Zanaga project in the Republic of Congo.
“These two iron ore opportunities present us with a very interesting entry into the sector and we’ll continue to look for further opportunities elsewhere,” Freyberg said.
Xstrata fell 1.4 per cent to close at 1,365 pence yesterday in London trading. Sphere, which has three projects in Mauritania, including half of the $US1.65 billion Guelb el Aouj development, fell 1.7 per cent to $2.90 in early afternoon trade.
Xstrata on November 3 raised its cash offer for Sphere by 20 per cent to $3.00 a share as prices for the steelmaking ingredient climb. The ore business is at present part of Xstrata’s coal unit, Mr Freyberg said.
The average price for ore delivered to China was $US145 a metric tonne in the first half, according to The Steel Index. That’s more than double the average $US69 a tonne for the same period last year.
Advertisement
Loading