December 22, 2004 | Graham

Ron Walker’s wrong, but so is Xstrata

Former Liberal Party bagman Ron Walker wants the Federal Government to buy WMC’s Olympic Dam “in the national interest”. WMC is under a takeover offer from Swiss company Xstrata. This is the same company that recently took over MIM, and more pertinently also bought a vanadium resource from PMA in Western Australia.
The stock in trade of bagmen, and particularly this one, is wheels and deals (Albert Park pun intended). That’s not too much of a problem, as long as you keep them away from making policy. Not a good look for the anti-socialist party to start socialising public assets. Ron would have got on well with Rex Connor and maybe should even be advising Putin on Yukos!
But in the case of Xstrata he is on to something, I think. Apparently the ACCC has given Xstrata a tick, but I think in the case of Xstrata there is something in the national interest case.
Xstrata are canny investors and very good at taking Australian investors to the cleaners. They bought MIM for a bargain basement price, largely because of the incompetence of the local yokels up here in Brisbane. They paid $1.70 a share (or thereabouts), but if MIM was still listed I suspect the shares would currently be trading north of $3.00. There is nothing wrong or dubious about this, and from all accounts Xstrata is doing a much better job of managing the assets than the previous owners.
The same thing can’t be said about the Windimurra assets formerly owned by PMA. This was a vanadium mine with somewhere around 10% of the world’s vanadium. It was a greenfields development which basically failed because of plant blow-outs and a slump in the price of vanadium. However, at current prices it should be more than viable. Xstrata already had South African vanadium interests, and Windimurra should have been a good fit. Too snug in fact, because Xstrata closed the mine down, much to the disgust of the vendor, PMA, who had taken consideration in the form of a royalty from the sale of the vanadium ore as it came out of the ground.
To bone up on PMA’s view of the world click here.
I’m not aware of Xstrata owning any uranium mines, but until they make good the WA situation, I don’t think they should be rewarded with a larger share of Australian dirt. The Australian government doesn’t need to buy it, it already has a perfectly good owner in WMC, which should continue in Australian hands.
Of course I might be biased. I should declare that companies with which I am associated have shares in PMA and had shares in MIM. One holding proved profitable, and the other not. But even the profitable one should have been much more monetarily rewarding.

Posted by Graham at 6:18 pm | Comments Off on Ron Walker’s wrong, but so is Xstrata |
Filed under: Australian Politics

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