From Brett Foley's article April 8 (Bloomberg)
BHP Billiton Ltd., the world's
biggest mining company, rose to the highest in almost four months
in New York trading after The Australian newspaper reported that
China will buy a stake.
China is in the early stages of planning to buy a bigger
stake in BHP than the 9 percent of Rio Tinto Group acquired by
state-owned Aluminum Corp. of China and U.S. aluminum producer
Alcoa Inc., the newspaper said today, citing unidentified people
in Beijing. BHP depositary receipts climbed as much as 5.6
percent, valuing the Melbourne-based company at $191 billion.
China's steel industry is the world's largest consumer of
iron ore, which Melbourne-based BHP mines in Western Australia.
BHP made a $156 billion hostile bid for Rio in February that
would create a company controlling more than a third of the
world's iron-ore supply and vie with Brazil's Cia. Vale do Rio
Doce as the largest producer.
``If Chinalco was allowed to buy a stake in Rio, I don't see
why they couldn't get a similar amount of BHP,'' Richard Knights,
an analyst at Numis Securities in London, said today by phone. ``
They wouldn't be doing it if they didn't think at some point they
could assert some kind of influence.''
BHP depositary receipts climbed $2.81, or 4.3 percent, to
$68.84 as of 12:54 p.m. in New York. A close at that price would
be the highest since Dec. 10. Earlier, the stock advanced 4.6
percent to 1,762 pence on the London Stock Exchange.
Illtud Harri, a London-based spokesman for BHP, and Rio
spokesman Nick Cobban, both declined to comment. Zhao Shangsen,
an official at the Chinese Embassy in London, said the embassy
couldn't comment on the report.
REGULATORY APPROVAL
Rio, which is based in London, rejected BHP's offer on Feb.
6, saying it ``significantly'' undervalued the company. BHP is
due later this month to lodge its application for the deal to be
cleared by European Union antitrust regulators.
The price of iron ore has risen to a record for a sixth
straight year. In February, Vale won a 71 percent increase for
ore from its Carajas mine from Nippon Steel Corp., JFE Holdings
Inc, and Posco, Asia's three largest steelmakers.
The raw material accounts for 13 percent of BHP's fiscal
2007 sales. Coking coal, another material used to make steel, has
tripled. China is also the largest user of aluminum, which
accounted for 15 percent of the company's revenue, and coal.
Rio and BHP, the second and third-largest iron-ore
exporters, are still in talks with Asian steelmakers for 2008
contracts. The steel companies are resisting Rio's demand for a
so-called ``freight premium'' to reflect the lower cost for Asian