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Xstrata is a smart company, knowing metal prices are deemed to go up.

Xstrata Raises Falconbridge Bid
By JACKIE RANGE
DOW JONES NEWSWIRES
July 19, 2006 12:01 p.m.

LONDON -- Anglo-Swiss miner Xstrata PLC on Wednesday again increased its hostile cash bid for Canada's Falconbridge Ltd., marking the latest move in an escalating bidding war.

Xstrata's offer values Falconbridge at 24.1 billion Canadian dollars (about $21.24 billion). The company's offer competes with a rival bid from Canada's Inco, which recently raised the cash component of its cash-and-shares bid for Falconbridge to C$18.50 a share.

At the same time, U.S.-based copper miner Phelps Dodge recently raised the cash component of its bid for Inco by C$2.75 a share to C$20.25. In an increasingly high-stakes battle for hot mining assets, Phelps Dodge, Inco and Falconbridge have proposed a friendly tie-up.

Xstrata is now offering C$63.25 per share for the 80.2% of Falconbridge it doesn't own. The offer also contains C$0.75 intended to match a special dividend declared by Falconbridge on July 16. The latest Xstrata offer represents a premium to the C$62.04 price at which Falconbridge shares closed Tuesday in Toronto.

Xstrata on Tuesday also waived the minimum-tender condition on its offer. Provided the company obtains approval for its bid under the Investment Canada Act and from its shareholders, Xstrata said it will be able to take up and pay for any shares tendered without further delay.

Previously, Xstrata had raised its unsolicited cash bid for the Falconbridge shares it doesn't already own to C$59 a share from C$52.50. The Anglo-Swiss mining giant also had lowered the minimum-tender threshold of its bid to 50.1% from 66.7%.

"Xstrata's revised offer reflects our belief in the fundamental value of this acquisition to Xstrata," said Chief Executive Mick Davis in a press release Wednesday.

Analysts said Xstrata's higher bid could be the move that finally wins them Falconbridge. "I think it's a knock-out; I can't see Inco coming back," said one, who asked to remain nameless.

Investec's John Clemmow said the bid was "probably just enough." Investec has a "hold" rating on Xstrata's stock.

Inco held a second-quarter earnings conference call just after Xstrata unveiled its renewed bid. The company said its bid for Falconbridge is still competitive and urged Falconbridge holders to accept its offer by July 27.

A Falconbridge spokesman said the company's board will review Xstrata's latest bid and communicate its recommendation as soon as it has completed its analysis. Phelps Dodge couldn't immediately be reached for comment.

Xstrata's London-listed shares were rising 2.6%, or 50 pence, to 1961 pence, in line with a broadly positive London mining sector. In Canada, Falconbridge's shares were trading up 2.4%, or C$1.5, to C$63.51, and Inco's shares were trading up 2.5%, or C$2, to C$78.90, outperforming the local sector.

In New York, Phelps Dodge's NYSE-listed shares were trading up $1.68, or 2.2%, to $78.94, following the broader market higher.