Xstrata offers $2.8 billion for Australia's Jubilee

SYDNEY (Reuters) - Anglo-Swiss miner Xstrata Plc (XTA.L) on Monday offered A$3.1 billion ($2.8 billion) for Australian nickel miner Jubilee Mines NL JBM.AX, seeking to consolidate its position as a global nickel producer.

The bid was unanimously recommended by the Jubilee board, while Xstrata has already entered into agreements to buy 17.5 percent of Jubilee's shares from shareholders and option holders, the two companies said in a joint statement.

Jubilee Executive Chairman Kerry Harmanis said the company had opened its books to several parties after receiving a number of expressions of interest, but believed Xstrata's offer was the most attractive.

"Jubilee is ... at an important stage and will benefit from the deeper capabilities and balance sheet of a major mining company such as Xstrata to maximize the potential of its resource base," he said.

The Xstrata offer was pitched at A$23.00 a share, 35 percent higher than Jubilee's closing price on Friday of A$17.10 a share.

Jubilee mines around 12,000 tonnes of nickel a year from its Cosmos nickel project in Western Australia, and plans to develop a second project, taking annual output to 22,000 tonnes a year by 2010/11.

Xstrata's nickel division, headquartered in Toronto, is the world's fourth largest nickel producer, with annual managed production of more than 110,000 tonnes of refined nickel.

Xstrata has interests in mines and processing facilities in countries including the Dominican Republic and Tanzania, and earlier this month approved the development of the Koniambo nickel mine in New Caledonia and said it would fund most of the $3.8 billion investment planned for the project.

Prices for nickel MNI3 on the London Metal Exchange rocketed to a record high $51,800 a tonne in May on concerns that annual demand would outstrip world supply, though they have since retreated sharply to $31,800 as those fears receded.

Jubilee's Harmanis said in August he expected China and other parts of Asia to drive an increase in demand for nickel, used stainless steel production, over the next 10 years.

About 1.3 million tonnes of nickel is consumed worldwide each year.

($1=A$1.09)