goldy said:
Now that XTA has received approval for its proposed takeover of WMC, whither Xstrata? It has already broken upwards strongly after three attempts and is reaching historic highs. Is it time to cash in or hold our for even headier heights?
Subject: Forecasts
Company: Xstrata PLC
Date: Wed 9th Feb 2005 5:33:42
Country: Australia
Industry: Metals & mining
Australia WMC Resources' record 2004 profit proves group's value, says CEO
(Repeating to clarify quote in 21st para)
SYDNEY (AFX) - WMC Resources Ltd chief executive Andrew Michelmore said the
base metals and uranium miner's record 1.327 bln aud net profit reported for the
past year underscored directors' views about the company's capacity to continue
to add value for shareholders.
At an analysts' briefing following the profit announcement, Michelmore said
WMC had delivered for shareholders and will continue to do so, repeating that
the company planned to return nearly 1.00 bln aud to shareholders through
capital management initiatives while maintaining balance sheet strength to fund
growth.
The return includes already announced higher dividends to shareholders.
Directors declared a final 0.20 aud dividend, taking the total dividend for
the year to 0.37 aud, up from 0.06 aud a year earlier.
Michelmore said the latest year's earnings had been helped by strong demand
for base metals from China, particularly for nickel.
"I see very good prices going out for the next three to four years helped by
China but there may be some dips...ups and downs in the market," he said.
He said indications from sources with China were that consumption of nickel
within that country will be around 140-145,000 metric tons of nickel compared
with 120-125,000 tons annually during the past two years.
The return of the company's nickel assets was about 50 pct. Michelmore said
the company's nickel operations in Western Australia are expected to continue
perform strongly in 2005.
He said WMC has a platform growth including a proposal to expand its Olympic
Dam copper/uranium project in South Australia, already rated among the world's
top copper projects as well as being the largest uranium resource with more than
one-third the world's known uranium oxide resources.
In the short-term, Olympic Dam's contribution to earnings are expected to
rise because of continuing strong prices and higher production due to improving
operational efficiencies.
However, costs have increased at Olympic Dam although not as great as
competitors because of the use of natural gas instead of oil. WMC said labor
costs are rising across its Australian operations because of high levels of
employment.
The latest year's profit result had already been flagged to the market in
takeover documents following an unsolicited offer from Switzerland-based Xstrata
Plc, which last week increased its bid to 7.20 aud a share.
The Xstrata offer values WMC at more than 8.4 bln aud but has failed to win
the endorsement of WMC's board which has described it as being at the low end of
a 7.17-8.24 aud valuation placed on the target company in an independent expert
report, prepared by Grant Samuel & Associates.
Reacting to Xstrata's revised offer, WMC's board said last week discussions
with a number of interested parties are being expanded to encompass potential
value-adding proposals around the whole company.
Analysts say a key hurdle which Xstrata still has to clear is winning
approval from the Australian government under foreign investment rules.
A decision is expected within weeks.
The net profit for 2004 was up from the previous year's 245.6 mln aud but
was inflated by the recognition of tax losses and other one-off tax gains.
Michelmore said WMC has built its assets from the ground up and now is the
world's third largest nickel as well as having the fourth largest copper/gold
project at Olympic Dam while also having the world's largest uranium mine.
He said these facts have not gone unnoticed, along with WMC's other
expansion projects including the world's largest ilmenite resource within the
Corridor Sands projects in Mozambique whose development is yet to sanctioned.
Michelmore said as a listed company, WMC is well aware of pursuing value for
its shareholders while Xstrata is interested in pursuing value for its own
shareholders.
"Xstrata's interest in WMC from day one has been targeted at driving value
for Xstrata shareholders by pursuing a well-timed and opportunistic offer,"
Michelmore said.
He noted, for instance, that there is a 58 pct shortfall of uranium oxide
mine supply over demand leading to prices doubling to over 20 usd a metric ton
in 2004 while long-term contracts are forecast to rise to more 25-35 usd a ton.
He said a number of companies have expressed interest in adding value to
Olympic Dam by sharing in expansion plans but any proposal had to reinforce
WMC's share price.
"We're not trying to sell Olympic Dam but just an equity position,"
Michelmore said.
He said the board is looking at all options to maximize value for
shareholders.
"We have not tried to restrict anyone bidding for WMC."
He said there are number of other parties interested in WMC's projects.
(1 usd = 1.31 aud)
[email protected]
blh/mas
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