According to Xstrata, the market turmoil made a takeover too risky at the moment. And corporate credit is a touchy subject these days. If you think it’s difficult to get a $200,000 house loan, you should try getting a $10 billion loan using your future mining activities as collateral right now.
But I doubt Xstrata would have that much trouble pulling the credit through. It has longstanding lending relationships (although, who knows if the banks it normally works with still exist at this point) that make corporate loans a little easier to procure.
The real question is whether Lonmin is really worth that $10 billion pricetag anymore. With flagging production, safety issues, power outages and the outward appearance that it doesn’t know how to fix any of those problems, the company is falling apart.
So Xstrata dumped its $10 billion bid and increased its Lonmin holdings to 24.9% (in the same day). You can’t tell me Xstrata isn’t still interested in the platinum miner. But after witnessing the company’s external and internal cohesion disintegrate in the last six months, Xstrata may believe it can acquire Lonmin for much less after the next six months.
Expect to see Xstrata make another move on Lonmin as soon as its six-month moratorium (set by the British takeover panel) is over.