Bhp Dismisses Talk About China
Sydney Morning Herald
Thursday April 10, 2008
BHP Billiton shares surged almost 4 per cent yesterday amid speculation that China was considering taking a stake in the world's biggest miner.
The report in The Australian newspaper claimed that Chinese authorities were in the early stages of considering taking a stake in BHP Billiton which would be higher than the 9 per cent interest that state-owned Chinese aluminium company, Chinalco, took in Rio Tinto in February.But sources close to BHP Billiton and Rio Tinto in China yesterday dismissed the reports. "If you were thinking of blocking a BHP bid for Rio Tinto, it would seem odd to bolster the BHP share price rather than save money and buy more shares in Rio," said a source at a large Australian mining company.A BHP Billiton spokeswoman in Australia, Emma Meade, said the company did not comment on market rumours.On a negative day for the market, the reports nevertheless sent BHP Billiton shares more than $2 - or 4.7 per cent - higher to $42.46, before closing up 3.7 per cent, or $1.51, at $41.91.The Prime Minister, Kevin Rudd, said yesterday that foreign investments remain welcome in Australia, while indicating that some investments are more welcome than others.Asked specifically about the possibility of a Chinese bid for BHP Billiton, he said: "I would think that any significant foreign investment application should be considered by the [Foreign Investment Review Board] and taken on its merits". Mr Rudd emphasised that China was not unique in having internationally acquisitive government-controlled entities, listing similar bodies in the Middle East and Russia."A whole lot of governments around the world are assessing how you regulate capital flows," he said. "Our approach is still one of being open to foreign investment flows."Chinese steelmakers have expressed concerns about BHP Billiton's proposed scrip takeover offer for Rio Tinto, which would create an entity with control over almost half the Asian iron ore market.The share ratio at the close of trading was 3.28-for-1, meaning Rio was trading below the 3.4-for-1 bid price given BHP Billiton's big share price rise.An Ord Minnett analyst, Peter Arden, said it was unlikely any Chinese move on BHP Billiton was aimed at scuttling a takeover of Rio Tinto, but rather motivated by a desire to secure commodities amid rising prices."If they really wanted to derail the merger, they'd be going for Rio Tinto," Mr Arden told AAP. "China is facing an irreconcilable problem in that it can't deliver enough commodities domestically, and it wants to get the cheapest commodities it can." with AAP
© 2008 Sydney Morning Herald