Optimum Coal shares climb as Glencore circles

JOHANNESBURG/LONDON Fri Aug 26, 2011 8:38am EDT

A worker uses a mobile lift to clean the windows of the headquarters of Swiss commodities trader Glencore in Baar near Zurich April 13, 2011. REUTERS/Arnd Wiegmann

A worker uses a mobile lift to clean the windows of the headquarters of Swiss commodities trader Glencore in Baar near Zurich April 13, 2011.

Credit: Reuters/Arnd Wiegmann

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JOHANNESBURG/LONDON (Reuters) - Glencore (GLEN.L), the world's largest commodities trader, stood on the verge of its largest takeover bid since its May stock market listing Friday, after South Africa's Optimum Coal OPTJ.J confirmed it had received approaches.

The move on Optimum, South Africa's sixth-largest coal producer, illustrates Glencore's appetite for deals in the volatile equity and commodity markets, which it has said will throw up bargains.

Sources close to the deal said late Thursday that the Swiss-based trader plans to bid for a majority stake in Optimum with its South African partner, politician-turned-businessman Cyril Ramaphosa.

Shares in Optimum, worth around $1 billion at current market prices, were up 5 percent at 31.5 rand at 1223 GMT after hitting their highest level in about four months.

Glencore, run by South African former coal buyer Ivan Glasenberg, is already a major player in both the South African and global coal trades. Its move to grow by snapping up Optimum taps into what analysts have long said is a need for small and medium-sized coal miners there to consolidate.

Optimum, a mid-size producer has export capacity and reserves that make it attractive prey for Glencore and other big foreign companies hoping to capitalize on Indian and Chinese demand. South Africa's enviable geographic position, with access to both the Atlantic and the Pacific coal markets, adds to its appeal.

Optimum, South Africa's fourth-largest exporter, said on Friday it had received "unsolicited, non-binding expressions of interest from third parties to acquire a controlling interest," without naming the parties involved.

Glencore declined to comment.

A purchase of the South African company would be Glencore's most significant since its record listing, when it sacrificed its fiercely protected privacy to gain the balance sheet firepower for acquisitions. In the past two months it has made a $475 million bid for a majority stake in the owner of the Mina Justa copper project in Peru and has also offered to buy out minority shareholders in Australian nickel producer Minara.

Optimum earlier this month alerted investors to circumstances that could affect its share price, but at the time denied having been approached by any prospective buyers.

"The stock was below 23 rand in early August so you would see why there is lots of interest at those levels," said Sasha Naryshkine, an analyst with Vestact in Johannesburg.

"It will depend now on what kind of a premium they are willing to pay."

GLENCORE CIRCLES

The sources told Reuters Thursday that Glencore and Ramaphosa were talking to Optimum shareholders and were preparing to make an announcement.

Shareholders in Optimum -- including Mandla Tshabalala of Mobu Resources, a small investor -- confirmed they had received an offer from the commodities giant and Ramaphosa, whose unlisted Shanduka Resources owns 30 percent of Shanduka Coal, a venture with Glencore.

Shanduka Coal has until recently been Glencore's vehicle for investment in coal mining in South Africa, where it has been a vital facilitator through prefinancing for some of the smaller miners.

Glencore's deep pockets and Ramaphosa's influence would make for a formidable bid which could nullify any opposition arising from unions or shareholders, some of whom may be reluctant to see the trader extend its reach in South Africa.

South African coal is famed for its reliable quality and the speedy handling of exports at the Richards Bay Coal Terminal have also made it an attractive market.

Coal miners in general, and in Africa in particular, have suffered from a lack of big ticket investment in mines and in infrastructure that has created bottlenecks, supporting prices.

Optimum, formerly owned by miner BHP Billiton (BLT.L), will produce 13.7 million tonnes in 2011, almost flat on 2010.

(Additional reporting by Helen Nyambura in Johannesburg and Jacqueline Cowhig in London; Editing by Erica Billingham)

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