Xstrata digs deeper for WMC

LONDON-listed miner Xstrata has dramatically raised the stakes in its battle for control of Australia's WMC Resources, lifting its bid 13% to A$8.4bn (£3.3bn).

Investors immediately chased up WMC's share price on the Australian stock exchange in the hope of a higher rival bid emerging to the new A$7.20-per-share offer.

WMC turned down Xstrata's original A$6.35-a-share offer as too low, as opponents launched an extraordinary, nationalistic campaign against the Anglo-Swiss group.

The improved offer has thrown the ball back into WMC's court. It said today it would consider the new bid but urged shareholders to take no action at this stage.

'The proposed offer price of A$7.20 per share only just falls within the low end of the independent expert's range of A$7.17 to A$8.24 per share,' WMC said.

Stock in the company jumped to a record A$7.59, although an alternative bidder seems unlikely.

Xstrata chief executive Mick Davis said: 'Over three months have passed since we first confirmed our interest in acquiring WMC, and yet no competing offer has emerged. We believe that any asset-level transaction would be unable to deliver value to WMC shareholders at levels anywhere near our increased offer.'

The battle for WMC, which has 38% of the world's known uranium at its Olympic Dam mine in South Australia, has been at the centre of a vicious campaign by Xstrata's detractors who hope to convince the Australian government to block the deal on national interest grounds.

Equally attractive to Xstrata is WMC's substantial copper deposits, also mainly centred on Olympic Dam, which would help the company realise its dream of joining the big boys at mining's top table.

While with a market capitalisation of $11bn (£6bn), it still trails giants such as BHP Billiton at $35bn and Rio Tinto at $33bn, the addition of WMC's copper assets at a time of booming demand in China would undoubtedly add value.

The company is also the world's fifth-largest producer of nickel. Xstrata insiders were confident their improved bid would find favour with WMC shareholders.

'Although it's more than we wanted to pay, I think the fact it's a final offer will precipitate a decision by shareholders. Our feedback from them has been relatively positive,' one said.

'Obviously we're listening to our own shareholders who know where the market believes the limit is,' he added.

Xstrata will fund the bid through financing from Barclays, JP Morgan Chase and Royal Bank of Scotland.