REUTERS, Melbourne | Thursday 9.50am.
MINING giant Rio Tinto has rejoined its battle with South African mining giant Anglo American for control of Australia’s North Ltd, hiking its offer substantially in its bid for North’s iron ore assets.
Rio Tinto’s new bid of A$4.75 a share, which values the Australian mining and forestry group at A$3.5bn, is well above Anglo American’s A$4.25 friendly offer and 95 cents higher than Rio’s original bid.
“The availability of synergies unique to Rio Tinto make us the logical acquirer of North,” chairman Robert Wilson said in a statement.
He added Rio expected its offer, which has been declared unconditional, to be endorsed by North directors.
A successful takeover by Rio Tinto would move it a step up the rank in size, making it the world’s second largest iron ore producer behind Brazil’s CVRD. If Anglo American won the deal it would enter the iron ore industry in fourth place.
However, Wilson acknowledged the higher bid meant the group would lose much of the synergies it had expected from linking the two company’s iron ore operations.
While North shareholders are bound to welcome the new offer, Japanese steelmakers are likely to be unimpressed for fear that Rio’s growth will destroy the steelmakers’ bargaining power in the annual struggle over prices.
North’s partners in Western Australia’s Robe River Iron Ore Associates – Mitsui & Co, Nippon Steel Corp , and Sumitomo Metal Industries Ltd – effectively agreed to subsidise Anglo’s bid and move volumes away from Rio.
The Japanese partners have agreed to buy more iron ore from North and to take a greater share of the burden in funding the development of the Robe River’s West Angelas project.
West Angelas is seen as a key attraction for Rio Tinto, particularly as it could slash development costs by using its rail and port infrastructure, but the Japanese partners have said the West Angelas agreement requires a new rail line to be built.