Has the very acquisitive Swiss based mining giant, Xstrata, been shut out of an Australian-linked deal for the second time in a month?
The Russian group, Norilsk Nickel, beat Xstrata to win control of LionOre, a Canadian-Australian listed nickel producer with interests in Australia and Africa. That was worth well over $6.7 billion
Xstrata though walked away with a break fee of around $320 million, which would have been enough to pay for most of the $4.75 a share, $391 million cost for NSW-based Gloucester Coal.
But it seems it is destined to miss out because an Asian trading company, Noble Group, has emerged with a blocking 10.4 per cent stake in Gloucester and started muttering about Gloucester being undervalued.
Now, that's either a bit of last minute brinkmanship for some deal, perhaps on handling some of Xstrata's Australian coal exports in Asia, or it's an attempt to overbid and win a deal from Gloucester, in exchange for keeping it independent.
GCL has two mining operations, Stratford and Duralie, both located in the Gloucester Geological Basin, to the north of the Hunter Valley in NSW. Production is around two million tonnes a year.
Noble Group, a Hong Kong-based supplier of raw materials from coffee to energy, took its holding in Gloucester to 10.4 per cent by acquiring 4.3 million shares. The deal was done late Tuesday and announced to the Singapore Stock Exchange.
Gloucester Coal issued a statement drawing attention to the Noble statement, while a substantial shareholding notice was issued to the ASX.
Noble is now the biggest shareholder in Gloucester.
"Noble Group believes that there has been a structural shift in coal markets, which reflects higher thermal and coking coal prices,'' Noble said in the statement. "Xtrata's offer undervalues Gloucester Coal.
"Noble Group is currently considering a number of strategic options and will be seeking discussions with the Board of Gloucester Coal."
Gloucester Coal shares Tuesday rose 5.1 per cent to $4.98, almost 5 per cent above Xstrata's $4.75-a-share cash offer, which has been unanimously recommended by Gloucester's board.
Gloucester shares traded over $5 yesterday, ending at $5.08 up 9c on the day.
Xstrata at the moment seems unlikely to lift its offer price. It was planning to takeover Gloucester through a scheme of arrangement. Noble's stake now blocks that and prevents Xstrata from gaining total control and incorporating Gloucester into its Australian coal business.
Xstrata has made clear it believes the $4.75 is a full value for Gloucester.
The Gloucester board has fully endorsed the Xstrata scheme for $4.75, but there is not a competing share offer, so on the face of it they would be hard put to turn around and withdraw that endorsement.
That's unless the discussions with Noble Group either produce a counter offer, or a deal that is superior to the Xstrata offer. Gloucester's directors can withdraw the recommendation if Noble makes it clear it will not accept the $4.75 offer.
Gloucester produced about 1 million tonnes of steaming and soft coking coal in the six months to last December and has been looking at boosting production by 40 per cent starting in mid-2009.
But that will depend on the timing of the expansion of the congested port of Newcastle and the Hunter Valley rail system.
The recent rains and flooding in the region has boosted spot steaming and soft coking coal prices out of Newcastle to around $US59 a tonne on some days.
The current low stocks and slow loading is more a function of those floods than the ongoing congestion which has hurt earnings and sales of Hunter Valley producers, such as Coal and Allied and Xstrata.
The Noble Group website describes the company as "a market leader in managing the global supply chain of agricultural, industrial and energy products. Noble's diverse product lines and global presence of over 80 offices in 40 countries is managed by a team of 3,000 employees serving more than 4,000 customers."
It has been active in the Australian coal and iron ore industries as a buyer and shareholding dealer for some years now.
