In Brisbane last week, Xstrata managing director, Peter Coates, told The Courier Mail that the company would not be dismembered.

 

"There may be some part of the business that doesn't fit our strategy and sure, we might get rid of it in a timely fashion once we've had a look at (the company), but it will have no major impact on the business," Coates said.

 

Nevertheless, it is clearly the performing coal assets in Queensland’s Bowen Basin that Xstrata has been interested in all along. Xstrata has grown exponentially in the last few years, largely by acquisition and almost exclusively in thermal coal. MIM’s coking coal operations will change the makeup of Xstrata’s business quite substantially and reduce exposure to the cyclical nature of one part of global coal trading.

 

Thermal coal currently makes up 63% of business but with MIM this drops to 33%, with 11% of the business in coking coal and 39% copper.

 

Once the deal is sealed expect some restructuring and tightening up of the purse strings. Cost savings of $74 million are expected to be delivered from the Brisbane head office and would possibly target areas such as the exploration division.

 

A long-time miner at one of MIM’s Bowen Basin operations expressed confidence that the workforce and management structure at the coal mines themselves would remain largely intact.

 

“We’ve done the hard yards and everyone can see we’ve got the runs on the board,” he told ILN.

 

Based on 2002 longwall production figures, a combined Xstrata/MIM mining house will manage the production of nine longwall mines for an approximate tonnage of 30Mt.

 

Meanwhile, MIM managing director Vince Gauci was a lone voice who last week refused to back the Xstrata bid.

 

The $1.72 is at the lower end of an independent report by Grant Samuel & Associates that valued the company at between $1.70 and $2.24 a share.

 

MIM said the Xstrata offer represents a 38% premium to its closing share price on November 20, 2002, the day before it acknowledged it had been approached by Xstrata, and a 46% premium to the 30-day volume weighted average share price up to that date.

 

Chairman Leo Tutt said the company was not seeking a counter bidder to Xstrata's $3.44 billion offer, but it had sought alternative offers before the deal.