Xstrata agrees £2bn deal for LionOre

London-listed mining group Xstrata said today it has entered into a deal to acquire Canadian nickel miner LionOre.

Anglo-Swiss Xstrata said the $4.6bn Canadian dollars cash offer (€3bn) forms part of its strategy to build its presence in the nickel mining sector.

The move comes at a time of record high nickel prices and follows the group’s acquisition of fellow Canadian nickel miner Falconbridge last year.

LionOre has operations in Africa and Australia and also produces gold as well as by-product production of copper and cobalt.

Xstrata Nickel chief executive Ian Pearce said: “The combination of LionOre with Xstrata Nickel brings together two very complimentary businesses and creates significant opportunities for the enlarged Xstrata Nickel business.

“With LionOre, we unleash opportunities to create value through additional production, strong synergy potential, access to new markets and increased opportunities for growth.”

Xstrata is headquartered in Zug, Switzerland and has a strong foothold in the copper, nickel, coal and zinc sectors. It said it plans to finance the $18.50 Canadian dollars (€11.94) a share bid through a mixture of cash and its existing credit facilities. The bid has been unanimously recommended by the LionOre board.

Colin Steyn, chief executive and president of LionOre, said: “We are very pleased to support this offer. The bid offers clear value to shareholders, and also positions our operations and employees as part of a growing, successful nickel producer.”

The price of nickel, which is used in making steel, has soared over the last year as stocks declined amid an increased demand for steel from China and other emerging markets.

Earlier this month Xstrata posted a 119% jump in full year profits as it benefited from high commodity prices, although it warned that prices could be more volatile in the year ahead.

Its operations span 18 countries across four continents, including Australia, Chile, Germany, Norway, the US and the UK.

Shares in Xstrata were up almost 3%, or 70p to 2648p, while LionOre jumped more than 7%, or 56.5p, to 812.5p.