Diversified resources group Xstrata has slammed the introduction of a proposed resources tax in Australia. Below is the press statement issued by the group:

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Frost & Sullivan metals & mining analyst Wonder Nyanjowa shares his thoughts on the results out of Xstrata. Developments at Xstrata will be closely watched as the company is attempting what is fast becoming a hostile takeover or merger between itself and Anglo American:

Read the analyst comments below:

In its results announcement this morning, Xstrata reiterated what it believes is the compelling strategic rationale for a merger with Anglo American Corporation, but without offering any new terms or conditions. Frost & Sullivan’s opinion continues to be that the Xstrata proposal is unlikely to find approval.

Anglo already has the scale and capacity to withstand the downturn in commodity prices. The recent upside potential shown by copper and iron ore prices will make up for the turmoil in diamond and platinum markets. Anglo has declined to formally open up discussions with Xstrata on the envisaged synergies and cost reductions of approximately $1 billion (as determined by Xstrata).

The envisaged synergies and savings are primarily unattractive to Anglo when the company has stated its own plans of trimming its cost base by $2 billion by 2010.

Local market intelligence firm Frost & Sullivan does not believe that the merger between Anglo American PLC and Xstrata will go ahead.

“Without delving much into the synergies that are likely to be realised from the complimentary businesses, such as coal and iron ore, my feeling is that it looks very unlikely that this proposed merger between Xstrata and Anglo American Corporation will be consummated. Anglo American Corporation has divested from gold to principally focus on platinum, diamonds and industrial metals. The group would want to grow the company in these sectors and maintain its unique identity and world class assets.

“It appears to me that Xstrata has long desired exposure in certain mineral groups like platinum and diamonds, where Anglo American Corporation has a strong presence. Xstrata’s hostile takeover bid for Lonmin in 2008 which would have provided exposure to platinum, fell through due to volatility in the commodities market and funding uncertainties. Their proposed merger is partly motivated by Xstrata’s desire to gain exposure to mineral groups such as platinum and diamonds, where they have little or no exposure at all.

“There will also be problems regarding valuation of assets, given the current uncertainties in global capital and commodities markets. Frost & Sullivan is also of the opinion that competition authorities, especially in South Africa, are unlikely to approve of the deal.”

Resources group Xstrata PLC has responded to the offer made by Anglo American for a potential merger.

The company released the following announcement on Sunday:

Xstrata plc notes the announcement made by Anglo American plc (“Anglo American”) today.  Xstrata confirms that it recently sent a written proposal to the Board of Anglo American seeking their consideration of a merger of equals of the two companies.

Xstrata believes a merger of these two world-class companies with complementary assets is highly compelling.  The combination would create a premier portfolio of operations diversified across multiple commodities and geographies, with enhanced scale and financial flexibility to fund future growth.  Xstrata has already quantified substantial operational synergies from the combination that are not available to either company operating alone.  In addition, Xstrata believes the optimisation and reprioritisation of the combined company’s organic growth pipelines would significantly enhance shareholder returns.

Xstrata is seeking to engage with the Board of Anglo American regarding a merger of equals that would realise significant value for both companies’ shareholders.  There is, however, no assurance that any transaction will be forthcoming from Xstrata’s proposal. Any further announcement will be made if and when appropriate.

Peter Hooley has been invited to join the Xstrata plc Board as an independent non-executive director and will be proposed by the Board for election by shareholders at the annual general meeting on 5 May 2009.  Mr Hooley has agreed to act as an independent external consultant to the Board with effect from 2 March 2009 until the annual general meeting.

Until 2006, Mr Hooley was Group Finance Director of Smith & Nephew plc, a global medical devices business, listed on the FTSE100 index. He was previously Group Financial Controller of BICC plc. Since 2002, he has been a non-executive director of Cobham plc, the aerospace and defence group and is Chairman of its Audit Committee.  He is also a director and chairman of BSN medical, a medical textiles business and from 1997 to 2000 was a non-executive director of Powell Duffryn plc. 

Robert MacDonnell has indicated that he intends to retire from the Xstrata plc Board and will not stand for re-election as an independent non-executive director at the next annual general meeting.  Mr MacDonnell has served as a director of Xstrata plc since its initial public offering and before that was a non-executive director of the former Swiss company, Xstrata AG.

Willy Strothotte, Xstrata plc Chairman, said; “During his tenure, Robert MacDonnell has overseen the significant growth of Xstrata into a global mining major and I thank him on behalf of Xstrata’s management and Board for the contribution he has made to Xstrata’s development over the past several years.

“We are delighted that Peter Hooley has accepted our invitation to join the Board, subject to shareholders’ approval.  With his extensive financial markets experience and a strong track record of creating shareholder value, the Board is confident that Mr Hooley will add significant value to Xstrata. I look forward to working with him and my fellow Board directors in achieving our commitment to Xstrata’s long-term strategy of growth and diversification in pursuit of value.”