Talk of Chinese Bid for Rio Lifts Australia

123jump.com Staff
26 Nov, 2007
New York City

ASX 200 index added 2.2% to close at 6, 471.40. Rams Home Loans shareholders approve sale of franchise network to Westpac Banking Corporation for $140 million. Rio Tinto surges on speculation that a rival bid from China may emerge. Zinifex Ltd announces record profit of $1.3 billion and that it has more than A$2.2 billion to make acquisitions. Australian dollar gained in international trading.

[R]5:00AM New York, 9:00PM Sydney – ASX 200 index rose 2.2% after mining stocks traded higher.[/R]

ASX 200 index gained 2.2% or 141.2 to close at 6,471.40.

BHP Billiton was up 4.6% and Rio Tinto added 7.5%. Preliminary stock turnover was 2.86 billion shares worth $5.79 billion, with 781 stocks up, 509 down and 341 unchanged.

The most traded stock on the market today was diversified financial Integrated Investment Group, with 636.56 million shares changing hands at a value of $25.33 million.

Rams Home Loans shareholders approved the sale of the non-bank lender''s franchise network and all the future business it writes to Westpac Banking Corporation for A$140 million. During the voting for the merger, 88% of shareholders voted in favor of the deal while 7 % were against it.

Rio Tinto Ltd surged after market rumors suggested that a rival takeover for Rio Tinto bid may be made by a sovereign fund controlled by China.

According to the reports China Investment Corp. was planning an offer that may include the backing of state-owned steelmakers including Baosteel Group Corp., Shougang Corp. and Anshan Iron & Steel Group. The reports indicate that the group including China Investment may offer a rival bid sooner that anticipated by most investors but did not suggested a time frame.

BHP has made a three-for-one stock proposal to buy Rio, but the largest customers based in China fear that the combined company would control too much of the export market for iron ore, the main raw material used to make steel. A combined BHP Billiton and Rio Tinto would control about 38% of global iron ore exports, the same as Brazil''s Cia Vale do Rio Doce, according to Australia & New Zealand Banking Group Ltd.

Rio chief executive Thomas Albanese, who has rejected BHP''s bid, is scheduled today to outline his plan to stay independent and increase aluminum and iron ore earnings.

Wu Jianxin, a Shougang spokesman, said he wasn''t aware of the proposal to join the bidding for Rio Tinto. Baosteel''s Head of Asset Operation Wang Chengran also said he wasn''t aware of the issue. Fu Jihui, board secretary of Angang Steel Co., Anshan Steel''s listed unit, was reported to be unavailable for comment.

The world''s third- largest zinc mining company, Zinifex Ltd announced a record profit of $1.3 billion for 2007. Ziniflex chairman Peter Mansell told shareholders that the performance had been buttressed by the successful merger of the company''s smelter business with that of Umicore to create Nyrstar, the world''s largest producer of zinc metal and subsequent sale of 87% of Nyrstar shares in one of the largest IPOs in Europe this year.

Chairman Peter added, “for shareholders, Zinifex increased the dividend paid this year by nearly 10 times that of the previous year to $1.40 per share, making Zinifex one of the highest yielding shares in the ASX 200.

""And still we have a very substantial war chest of more than A$2.2 billion ($1.9 billion) which can be deployed to grow our mining business or to return to shareholders. Central to our consideration of possible acquisitions that meet our growth criteria is delivering shareholder return,"" he said.

Zinifex, which this month named Andrew Michelmore as chief executive officer, may acquire zinc and copper mines in North America, China and Africa after selling its smelters.

The company needs new projects to replace dwindling ore at its Century mine in Australia, which is due to run out in 2015. Zinifex share rose 1.7% amid speculation of a possible takeover offer from Australian rival Oxiana Ltd.

The dollar closed stronger today after the local election. At the close, the Australian dollar was trading at $0.8833, up from Friday''s close of $0.8727. During the trading session, the Australian dollar traded between a low of $0.8755 and a high of $0.8847.

Agribusiness group ABB Grain gained 0.8% despite posting an 89% drop in annual earnings due to severe drought across Australia.

Gaming and wagering group Tabcorp Holdings gained 1.2% despite its caution that wider smoking bans and the horse flu outbreak would cut into earnings.

Of the ASX 200 index shares, Mincor Resources led the gainers with a rise of 9.7% followed by increases in Emeco Holdings by 9.5%, in Murchison Metals by 9.5%, in Paladin Resources by 9.3%, and in Leighton Holdings by 8.8%.

Of the ASX 200 index stocks AGL Energy Limited led the decliners with a fall of 1.7% followed by losses in Valad Property of 2%, Asciano Group by 2.2%, in MFS Limited by 3%, and 5% in Gunns Limited.

Of the other active stocks, Australia and New Zealand Bank added 1.2%, National Australia Bank rose by 0.6%, Commonwealth Bank of Australia increased 1.9% and Westpac banking gained 1.5%.

In the energy sector, Woodside was up 2.3%, Santos was higher at 2.4% and Oil Search was down 0.2%. In the gold sector, the spot gold price was $825.80 per ounce, up $16.05 on Friday''s closing price in Sydney of $809.75 per ounce. Lihir added 5.2% and Newcrest mining put on 6%.

The retailers advanced with Woolworths gaining 1%, David Jones adding 0.8%, Harvey Norman edged higher 3%, and Wesfarmers, owner of Coles added 3%.

The media sector was trading higher, with Publishing and Broadcasting up 2.7%, News Corporation trading up 1.1%, and Fairfax finishing 1.9% higher.

Telstra finished 1.5% higher and its installment receipts gained nine cents to $3.19 and Qantas gained 1.9%.