Brazilian mining company in takeover tlaks with XStrata

On Wednesday, Brazil's Companhia Vale Do Rio Doce (Vale) announced it was in talks to buy Anglo-Swiss mining group XStrata Plc, majority owner of SMI.

Reports said the deal could top US$90 billion.

Although sources from Vale warned that "current market conditions" would make the deal very difficult, a possible takeover or merger would raise the total worth of the two companies to at least US$150 billion.

XStrata Plc earlier admitted it was in talks with several mining companies for possible merger or sale.

Should the Vale's acquisition of XStrata materialize, it would become the fourth foreign-owned mining firm to corner majority stakes at SMI.

Last year, XStrata Copper, a subsidiary of XStrata Plc, exercised its option over the gold and copper project from Indophil Resources Limited to become the mining firm's controlling stockholder.

Sometime in 2002, Indophil acquired the rights over the Tampakan Copper and Gold Project from Western Mining Corporation after the latter abandoned its exploration activities in the area in the late 1990s.

Both mining firms are based in Australia.

As news of takeover talks leaked out, Vale's share prices in the Brazilian stock trading fell by 5.8 percent while XStrata shares dropped by over 5.0 percent in London.

Late last year, XStrata announced its exploration studies in the Tampakan Copper and Gold Project could yield as much 2.2 billion tons in ore deposits, up 10 percent from the last estimate declared in April 2006.

The upgraded measured, indicated and inferred resources were pegged at a grade of 0.6 percent copper and 0.2 grams per ton gold and contains 12.8 million tons of copper and 15.2 million ounces of gold using a 0.3 percent copper cut-off grade, XStrata said in a statement.

SMI recently hogged the headlines after heavily armed members of the communist-led New People's Army staged a New Year's Day attack at its base camp in the remote village of Tablu in Tampakan, South Cotabato.

No one was hurt during the attack but some P12 million worth of company buildings ware burned down by the NPA rebels. (Edwin G. Espejo / MindaNews contributor)