The stock gained as much as 4.3 percent and closed 3.4 percent up at 340.63 rand in Johannesburg, the highest since May 31. Shares worth 244 billion rand traded ($31.8 billion), 247 percent of the three-month average volume and almost twice as much as rival BHP Billiton Ltd. (BHP)
“What is affecting sentiment the most is the speculation about Xstrata and Glencore,” Doug Blatch, head of equity trading at Investec Asset Management, said by phone from Cape Town. “Immediately the market starts thinking what else could be in play. It’s a game of chess; who makes the next move?”
Glencore is looking to buy the shares it doesn’t already own in Xstrata to add coal, copper and nickel mines from Africa to Asia. Xstrata dropped a proposed 29.2 billion-pound ($46.2 billion) offer to merge with Anglo and create one of the world’s largest mining companies in October 2009 after the London-based company’s board snubbed the approach.
“We know that Anglo has potentially been a target before,” Blatch said. “What would be the next move for a combined Xstrata-Glencore if that were to happen?”
Anglo may not be a good fit for Xstrata and Glencore if they were to merge, Peter Davey, a London-based mining analyst with SBG Securities said by phone.
“Glencore is primarily a trading house; you don’t trade diamonds and platinum,” Davey said. “I think a combined entity of Xstrata and Glencore might have different drivers than where Xstrata was coming from before.”
Improved sentiment after data showed an expansion in manufacturing across the globe may also be boosting mining shares, while a report in today’s Business Day that South Africa’s ruling African National Congress found that the nationalization of mines would be unconstitutional and too expensive also contributed, Investec’s Doug Blatch said.
U.S. manufacturing grew at the fastest pace since June, a report showed yesterday. The U.K.’s factory measure unexpectedly reached an eight-month high, and manufacturing gauges in South Africa, Europe, China and India rose in January.
“I don’t think the market has given too much credence to the fact that full nationalization was on the cards,” Blatch said. “Increased royalties would probably be more acceptable to most. At the margin, it certainly is positive.”
The government can’t afford to buy stakes in South Africa’s mines, and it would be against the constitution to seize them, the Johannesburg-based newspaper said. Mining companies should pay more tax and royalties, and there should be more processing of raw materials locally with higher duties on the export of unprocessed minerals, Business Day said.
“The good news is there’s no point in killing the golden goose; the sting in the tail is we need to take more royalties and taxes,” Davey said. “Anglo is going to get taxed even more in South Africa where it makes half its revenue. Where’s the good news in that?”
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