VENTURES AFRICA – The share price of Xstrata, one of the world’s largest global diversified mining company, gained 0.38 percent on the London Stock Exchange (LSE) on Wednesday as investors’ confidence on the stock returned.
This was despite the fact that the US “Fiscal Cliff” continued to negatively impact stock prices.
The proposed merger of Xstrata and Glencore has been affecting the price adversely since the announcement was made in February this year.
Investors have been worried sick that should the deal fail to materialise, it will affect the value of the share.
Late last week, South Africa’s competition tribunal postponed the hearing of Glencore International’s $33 billion takeover of Xstrata to January next year.
The court was supposed to hear Glencore’s defence late last week against South African power utility Eksom’s concerns that the deal could affect its coal supplies.
But the court put off the hearing until January 18 after both the parties asked for more preparation time.
The stakes are high for SA’s biggest coal producer Xstrata, a key supplier of fuel to Eskom. When merged, Glencore and Xstrata would be the largest trader in the South African coal market and would supply 15 per cent of Eskom’s coal.
Eskom is cautious about the merged entity dominating the market by setting prices that are unaffordable and opting for exports in order to gain higher returns.
This is because in the past Eskom has had to face concern about insufficient and poor quality of coal, thereby affecting its ability to meet the fast rising demand for electricity in major platinum, gold and mineral production.
Eskom does not want the deal to be abandoned but wants the country’s Competition Tribunal to put conditions on the merger to ensure coal supplies to its power plants are not at risk.
This is because Eskom relies on power plants to generate 85 percent of the electricity that powers South Africa and wants to ensure the tie-up does not obstruct its ability to obtain timely, sufficient and competitively priced coal.