RE: Severe competition for these type of assetsThe WMC acquisition would come at an 18 percent premium and 2.6 times book value, according to Bloomberg data. Xstrata, the world's fourth-largest exporter of coal burned in power plants, bought Australian copper and zinc producer M.I.M. Holdings Ltd. for A$5.1 billion in 2003 at a 16.5 percent premium, paying 1.9 times book value, the data showed.
``This deal should highlight to investors the scarcity of high-quality, long-life assets in the market,'' said Evy Hambro, who helps manage about $8 billion for Merrill Lynch & Co. in London. ``There is very, very severe competition for these type of assets.''
Buying WMC will give BHP control of the Olympic Dam in South Australia, which sits atop the world's fourth-largest deposit of copper and gold and holds more than a third of the world's uranium. WMC plans to spend more than A$4 billion on an expansion that would triple the project's sales.
Adding Uranium
``It is an excellent opportunity to build on our existing nickel and copper businesses and bring uranium into our suite of energy products,'' BHP's Goodyear said. Uranium prices have climbed 51 percent since the start of 2004 to $21.75 a pound, according to London-based publisher Metal Bulletin.
China plans to build 27 nuclear power plants by 2020, India is adding as many as 31 reactors and Russia plans to construct 25. Commercial stockpiles of uranium fuel dropped 50 percent between 1985 and 2003 as production from mining companies such as Cameco Corp. of Canada failed to meet demand, according to a Massachusetts Institute of Technology report.
WMC's nickel business has mines and processing plants near BHP's Ravensthorpe project in Western Australia. Prices of nickel, used in stainless steel, climbed to a 14-year high of $17,700 a ton in January 2004. The metal traded at $16,260 today on the London Metal Exchange.