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China Steps Up Effort to Derail BHP Bid for Potash

China is attempting to derail BHP Billiton Ltd's (NYSE ADR: BHP) bid for Potash Corp. (NYSE ADR: POT), as Beijing frets over the long-term supply of resources, according to a report yesterday (Wednesday) by the Financial Times.

Fearing that it could have a negative impact on Chinese imports, the state-run Sinochem Group has hired Deutsche Bank AG (NYSE: DB) and Citigroup Inc. (NYSE: C) to help disrupt BHP's bid for the fertilizer company, people familiar the matter told the FT. A Chinese bank, thought to be Industrial and Commercial Bank of China, was also part of the team.

Citigroup, which acts as joint corporate broker to BHP along with Bank of America Corp.'s (NYSE: BAC) Merrill Lynch unit, has asked to be relieved of its role in BHP's bid in order to advise Sinochem on a potential counter-bid.

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BHP Billiton's Bid for Potash Could Spark Surge of M&A Activity in Agribusiness Sector

BHP Billiton's (NYSE ADR: BHP) $38.56 billion bid for Potash Corp. of Saskatchewan Inc. (NYSE: POT) is just the latest episode in what's likely to be a continuing surge of merger-and-acquisition (M&A) activity in the agribusiness sector.

Canada-based Potash, the world's largest producer of potash, yesterday (Tuesday) rejected an unsolicited takeover bid from the Australia mining giant, calling the offer "grossly inadequate."

The fertilizer company also quickly adopted a so-called poison-pill defense to fend off would-be suitors, though it said it would be open to a transaction if the price were right.

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Buy, Sell or Hold: BHP Billiton is Poised to Pick Up Big Gains on the Back of a Global Commodities Bull

Face it, commodity prices are in a secular rally - and there are three big reasons why.

  • Loose Monetary Policy
  • Growing Demand in Emerging Markets
  • And the Congruent Devaluations of Major CurrenciesWe've already profited from this inflationary trend in the Money Map VIP Trader.  And - just like I did with the broadband revolution - today I am presenting you with a stock that stands to benefit from these developments - BHP Billiton Ltd. (NYSE ADR: BHP).
First, let's talk about policy. Immediately following the 2008 financial crisis, the Group of 20 (G20) countries agreed to stimulate their economies simultaneously.  And, while the emerging economies almost unanimously have already returned to strong rates of growth, most advanced economies are just now turning the corner.

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Historic Agreement Ends 40 Year Old Iron Ore Benchmark as Miners Get Short-Term Pricing Contracts

In a historic moment for commodities markets, two of the world's largest iron ore producers, Vale SA (NYSE ADR: VALE) and BHP Billiton Ltd. (NYSE ADR: BHP) signed short-term contracts for record prices with Asian steel mills that effectively replace a 40-year-old system of setting prices annually.

The landmark move by Vale and Anglo-Australian BHP ended the annual benchmark system when they signed new short-term deals linked to quarterly prices on the spot market, with the Brazilian company winning a 90% increase. Another large iron ore producer, Rio Tinto PLC (NYSE: RTP) has yet to sign any new contract, but is expected to soon follow.

The primary mineral used in steel, iron ore directly affects steel prices and the cost of everyday goods, including refrigerators, cars, and washing machines. That made the recent negotiations one of the most important issues for the global economy and commodity markets.

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Guilty Plea by Rio Tinto Execs Shines Light on Complexity of China's Iron Ore Market

When four Rio Tinto PLC (NYSE ADR: RTP) executives stunned observers by pleading guilty to bribery charges in a Shanghai courtroom, it brought to light the unorthodox and complicated nature of doing business in China's iron ore industry.

Unlike corrupt transactions in other resource-rich countries where customers often receive bribes or kickbacks in exchange for arranging lucrative contracts, in China just the opposite is often the case.

The Rio Tinto executives, for instance, were accused of receiving bribes in return for delivering supplies of highly-desirable iron ore - the key commodity in China's burgeoning steel-making industry.

The four executives admitted receiving $13.5 million (92.18 million yuan) between them in bribes, China's state news agency Xinhua reported, citing court documents. They could face up to 20 years in prison.

But the gist of the story revolves around China's chaotic iron-ore trading system.

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Iron Ore Negotiations Reach an All-Too-Familiar Impasse

Iron ore negotiations have ground to a halt - again.

Iron ore producers and consumers were so far apart last year that negotiations on pricing broke down entirely. No price benchmark was reached between major Australian iron ore miners and China's steel mills.

Instead, steelmakers resorted to buying their iron ore from smaller producers on the volatile spot market. And they may have to do the same thing again this year.

That's because iron ore producers - led by Brazil's Vale SA (NYSE ADR: VALE) and Australian juggernauts BHP Billiton (NYSE ADR: BHP) and Rio Tinto PLC (NYSE ADR: RTP) - are reportedly looking for an increase of as much as 90% in the benchmark price.

"The negotiations are difficult. These miners hope for a large rise" in the 2010 benchmark price of iron ore, said Deng Qilin, the chairman of both the China Iron and Steel Association and the Wuhan Iron & Steel Group. "We can't digest the pressure of what they're asking us."

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Buy, Sell or Hold: Buying Into Brazil by Betting on Vale (NYSE: VALE)

On Oct. 27, 2008, I strongly recommended that Money Morning readers invest in the Brazilian stock market through the iShares MSCI Brazil Index Fund (NYSE: EWZ).

It was a momentous decision. The U.S. economy and the global financial system seemed to be coming to a precipitous end.

The day before Money Morning published my lengthy analysis and recommendation, The New York Times published an editorial by the newly anointed economics Nobel laureate Paul Krugman, entitled "The Widening Gyre." Krugman in that editorial criticized those of us who believed emerging economies would decouple from the financial melee that was wrought by the over-leveraged and imbalanced developed economies.

"The really shocking thing, however, is the way the crisis is spreading to emerging markets - countries like Russia, Korea and Brazil," he wrote. And he derided the notion of "the supposed ability of emerging market economies to keep growing even if the United States fell into recession.... Now the emerging markets are in big trouble."

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Buy, Sell or Hold: BHP Billiton is the World's Premier Commodities Mining Play

BHP Billiton Ltd. (NYSE ADR: BHP) is the largest and most diversified mining producer in the world.  And the company has had the foresight to acquire assets that provide access to the highest-potential minerals and commodities on the planet. Other than lithium – "the next oil," which will skyrocket with pure electric car production starting […]

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Investment News Briefs

With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world. Santander IPO Aiming for $7.3 Billion; Deloitte: Flat Holiday Sales; RBS Gauging $8 Billion Share Sell Interest; HBSC Downgrades Lukoil; Citi: BHP May Consider Share Buyback; Lennar Posts Another Loss; […]

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Investment News Briefs

With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world. OECD: Up To 25 Million Jobs Lost; BHP Affirms China's Strength, Demand; Adobe Buys Omniture; Emerging Market Stocks Double From Oct. Lows; Corning Buys Plastic Maker Axygen BioScience; Blockbuster Closing […]

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Rio Strikes While the Iron is Hot, but BHP Holds Out for More

By Jason SimpkinsAssociate Editor Steelmakers throughout Asia cringed earlier this week when they heard the news that Aussie mining giant Rio Tinto PLC (ADR: RTP) had secured a 97% price increase for its iron-ore. But getting Rio out of the way was only half the battle, because now steelmakers are forced to confront BHP Billiton […]

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Rio Tinto: New BHP Offer Neglects its "Underlying Value"

By Jason Simpkins Associate Editor Rio Tinto PLC (RTP) rejected BHP Billiton's (BHP) revised $147 billion takeover bid hours after its rival made its offer yesterday [Wednesday]. In a statement, Rio Chairman Paul Skinner said the bid failed to recognize the "underlying value" of the company's assets and prospects. "Our plans are unchanged, and will […]

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BHP Readying Another Rio Bid

By Jason Simpkins Associate Editor After having its first takeover proposal rejected by Rio Tinto PLC (RTP), BHP Billiton Ltd. (BHP) appears poised take another shot at wooing its fellow mining giant. Rio Chief Executive Officer Tom Albanese rejected BHP's initial $127 billion offer, saying it "significantly undervalued Rio Tinto and its prospects." Albanese also […]

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