Published: 09 November 2007

BHP Billiton is expected to return with an improved offer for Rio Tinto after the UK-based mining giant rejected a $142bn all-share approach that would create one of the largest companies in the world.

BHP, which has its headquarters in Melbourne, revealed yesterday it had approached the Rio board in the past two weeks outlining a “potential combination with Rio Tinto on terms incorporating a premium”.

Rumours of the “mega merger” between the world’s first and third largest mining groups have repeatedly circulated the market this year and BHP confirmed yesterday in a regulatory statement that it had made an indicative bid.

Shares in Rio Tinto, which is listed in London and Australia, leapt 21 per cent to a record 5,296p, valuing the company at $144bn last night. BHP shares fell 5.6 per cent to 1,656p.

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By: Carmelo Ruiz

The public relations (PR) business is one of the fastest growing industries in the global market economy. In order to face perils like labor unions, organized consumer activists and environmental groups, governments and corporations have come to rely more on slick PR campaigns. The peril to popular democracy posed by PR firms should not be underestimated. Using the latest communications technologies and polling techniques, as well as an array of high-level political connections, PR flacks routinely “manage” issues for government and corporate clients and “package” them for public consumption. The result is a “democracy” in which citizens are turned into passive receptacles of “disinfotainment” and “advertorials” and in which critics of the status quo are defined as ignorant meddlers and/or dangerous outsiders.

Burson-Marsteller (B-M) is the world’s largest PR firm, with 63 offices in 32 countries and almost $200 million in income in 1994. Although its name is unknown to most people– even to many in activist circles– B-M is fast becoming an increasingly important cog in the propaganda machine of the new world order.

Human Rights, Anyone?

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by Nityanand Jayaraman

More than 5,000 people converged this month in the southern Indian state of Tamil Nadu to protest a deal that set the stage for the state government to appropriate almost 10,000 acres of land and hand it over to Tata Steel Corporation, a subsidiary of India’s largest conglomerate. The June 2007 agreement allows the giant company to mine ilmenite in Sathankulam, an agrarian pocket of India’s coastal countryside.

This ilmenite, when processed, yields titanium metal and titanium dioxide (TiO2), both extremely valuable products. But many locals are refusing to sell out of concern that the ilmenite mining operations and loss of land will destroy their traditional way of life and despoil the environment. At least 40 percent of the population — the landless and those engaged in household industries — depend on farming palmyra trees for subsistence or supplemental income.

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 IRM was just one of many shares storming to new highs yesterday, as the ASX/200 made an all time intra-day high of 6,684. Iron Mountain announced high grade mineralisation at its Mt. Richardson iron project in West Australia. In its price-sensitive release to the ASX, the company said that “The Iron Mountain Prospect rock chip samples averaged 61.3% Iron (Fe) over two kilometers of strike.”

The company announced results from two-other drilling simples. Both indicated high-grade haematite iron mineralisation. Which is another way of saying….eureka! Except in this case, rather than finding real gold, Iron Mountain has found industrial gold…the raw material desired by Chinese steel mills.

And at the upper end of the share-market, Fortescue (ASX:FMG) and BHP (ASX:BHP) both continue their relentless climbs higher. Fortescue is now the 23rd largest company in Australia by market cap, despite the fact it has yet to deliver any product to customers or make a profit. The catalyst for yesterday’s 8% lurch higher was legal. BHP lost its appeal against a ruling that allows Fortescue access to BHP’s Mt. Newman railway line in the Pilbara.

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In August, the last of the major Canadian steel makers was sold to United States Steel Corporation for $1.1 billion. Earlier, Dofasco was sold to a European company which has since been swallowed up by Mittal Steel Co. of India.

This latest foreign takeover is just one in a list that is becoming longer than the Canadian winter. Canadian mining giant Inco Ltd., is now owned by Brazil’s CVRD, and Falconbridge Ltd. of Sudbury — which Inco tried unsuccessfully to acquire — is the property of Xstrata, a Swiss-based company. The combined selling price for these two famous Canadian companies was $38 billion.

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Now that South African Marius Kloppers is running Australian-icon BHP (ASX:BHP), is he more interested in Canadian aluminium producer Alcan (NYSE:AL) or America’s own Alcoa (NYSE:AA)? Or should he be more interested in his own shares?

Kloppers does not exactly have the same problem David Neal has at the Future Fund. Neal has to invest the money in something to offset a future liability. He cannot return cash to public pensioners.

BHP, on the other hand, does not have to make an acquisition. In February the company bought back nearly US$13 billion in its own shares. Chip Goodyear decided the best use of cash was to return it to the shareholders in the form of a buy-back.

Whether the new regime at BHP – or Rio Tinto (ASX:RIO) for that matter – decides to pursue major acquisitions depends on where they think we are in the commodity cycle. If you think we’re at the top of the cycle, where prices are more likely to decline than increase, you return cash to shareholders, or save it for a rainy day when assets are on sale for cheap. Or, cashed-up from years of bumper profits, you see consolidation in the sector as the big fish buy the little fish, and prices for metals gradually (or not so gradually) decline back to cyclical lows.

But BHP and Rio must think there is more life to the boom yet. We don’t know what their price forecasts for base metals are. But we do know nearly everyone on the planet has been surprised and taken a bit off guard by the strength and persistence of metals demand from China and the emerging world and is rushing to meet the demand with new resources.

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The U.S. approval follows the province of Quebec’s government approval for the takeover earlier this month.Rio formally launched a pre-agreed offer for Montreal-based Alcan in July, trumping an earlier hostile offer by U.S. rival Alcoa (AA.N).

The whole idea never made sense to Roscoe Churchill.

Why would Wisconsin, with its rich abundance of lakes and forests, even consider opening its door to the mining industry? the retired elementary school principal from Ladysmith would ask.

Why jeopardize all that, he’d say, for an industry with a truly wretched past — as evidenced by the scarred landscapes of northern Minnesota and Michigan’s U.P.?

And nobody knew more about the industry’s misdeeds than Churchill and his wife Evelyn, who spent many summers in the 1970s and ’80s checking out mine sites throughout the United States and Canada.

“If there’s an open pit mine that hasn’t caused major pollution, I’d like the (Wisconsin) Department of Natural Resources to show me where it is,” he grumbled in 1991, shortly after the DNR approved permits that allowed the Flambeau Mining Co. — a subsidiary of Utah-based Kennecott Minerals Co. and British mining giant Rio Tinto — to build a 32-acre open pit copper mine near the Flambeau River in northwestern Wisconsin.

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It sure seems like a crazy summer already in North America. June 21 is the longest day of the year in the Northern Hemisphere. This morning we read about a crowd in Austin, Texas pulling a man out of his car and beating him to death, after the car accidentally bumped into a four- year-old girl. Mobs are dangerous things, and not just in parking lots or at public spectacles.

In our on-line poll of which stock is the best to own for the next five years, “Other” has been overtaken by Fortescue in late-night voting. We thought it was an interesting exercise in taking the mood of the public. It’s not an exact science, though.

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