World Economic

Anglo-Swiss mining giant Xstrata PLC said Wednesday it was making a $10 billion cash offer for Lonmin PLC, the world’s No. 3 platinum producer. The offer sent Lonmin shares soaring 47.3% to $66.70 on the London Stock Exchange, but the company immediately rejected the offer as not high enough.

Xstrata was offering $33 for each Lonmin share, which it said was a 42% premium over Tuesday’s closing price. Zug, Switzerland-based Xstrata already holds 8.03% of Lonmin’s shares.

The offer came as Xstrata reported profits of $2.75 billion, or $2.87 per share, in the first half of the year. The results represent an 8% drop in profits compared to the year-earlier period.

Xstrata CEO Mick Davis said the bid for London-based Lonmin "marks the next step in our strategy to develop a significant platinum business and add further scale and diversification to our portfolio."

Platinum is used in jewelry and for catalytic converters in automobiles. Expectations of growing demand in China for the metal led prices to surge from about $1,225 per troy ounce a year ago to $2,250 per ounce in February no checking account payday advance. Prices have since fallen under $1,600 again.

All of Lonmin’s mines are in South Africa, where 77% of the world’s platinum is extracted.

Lonmin has struggled to fully exploit its mines and the recent high platinum price, Xstrata said.

"Xstrata believes that Lonmin’s operations are attractive, but that a significant transformation of operating and management practices is required to return Lonmin to its former growth trajectory over time," it said.

Xstrata has significant coal and platinum operations in South Africa and is prospecting new locations in the country’s Bushveld region.

The company said it would fund the Lonmin takeover out of its own reserves and through bank debt. No regulatory hurdles are expected, it said.

Shares in Xstrata rose 1.7% to $63.51. 

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