Global Investing

Mick Davis takes late-cycle punt with Lonmin bid

August 6, 2008

xstrata.jpgMining stocks have lost a third of their value over the past three months on fears the commodity super-cycle is coming to end — but Xstrata’s Mick Davis reckons it’s still a good time to buy.

The acquisitive miner’s $10 billion cash bid for Lonmin, the world’s third-biggest platinum producer, is opportunistic and far from friendly.

But it has injected a badly needed buzz back into the sickly sector, lifting stocks across the board. And Lonmin investors are already betting on a sweetened offer.

Platinum traders, too, will be cheering Mick’s move. Spot metal prices rose more than 3 percent as traders saw the bid as a vote of confidence for the future of the market.

Winning Lonmin would help Xstrata diversify its business from industrial metals such as copper. It might also help the Swiss-based group retain its independence in the dog-eat-dog mining sector. 

Five months ago, Xstrata escaped being bought when a takeover attempt by Brazil’s Vale failed.

(Reuters photo:  Xstrata logo at the company’s headquaters in Zug)  

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