7 Aug 2008

Lonmin snubs takeover offer by Xstrata

11:08 am on 7 August 2008

Anglo-African platinum miner Lonmin has rejected a £5 billion ($US10b) takeover offer from bigger rival Xstrata.

The officer of £33 cash per share is at a 42% premium to Lonmin's share price at the close of business on 5 August.

The news drove Lonmin shares up 47% to £34.26 in London but Xstrata's shares fell in afternoon trade. Xstrata later revealed that it now owned a 10.6% stake in Lonmin after buying additional shares in the business on Tuesday.

Xstrata shares initially rose as much as 4%, but in later trading erased earlier gains to close down 1% at £31.67.

Global metal prices have soared over the past year due to rising demand from fast-growing countries such as China and India.

Platinum is used in catalytic converters in cars to trap carbon emissions and is being increasingly used for this purpose as regulations demand the production of greener vehicles.

Lonmin operates in South Africa, which has two-thirds of the world's platinum.

But the BBC reports Lonmin has not benefited from price rises as much as it could have, as safety problems at its smelters and a power crisis in South Africa have forced it to repeatedly cut production targets.