• Heavy equipment maker Caterpillar Inc. (CAT) said it will offer voluntary early retirement packages to about 2,000 workers. Age and length of tenure will determine who gets the offer. “Our intent is to provide eligible employees the opportunity to retire early as we expect significant declines in all geographic regions,” Sid Banwart, vice president of human services, said in a release.

• Canada recorded its first monthly trade deficit in December, its first in more than 30 years. The C$458 million deficit ($366 million) stems from “collapsing commodity prices and the deep dive in U.S. spending, especially on autos,” Doug Porter, deputy chief economist at BMO Capital Markets in Toronto, told Bloomberg. The country is the No. 1 exporter of oil and natural gas to the U.S., and overall exports fell 9.7% in December.

• Research in Motion Ltd. (RIMM) said its quarterly earnings would meet the low end of expectations. “You probably see big financial institutions cutting costs … and the consumer is just not getting a new handset,” James Cordwell, an analyst with Atlantic Equities in London, told Reuters. “It just shows they’re not immune to the economic slowdown like anybody else.”

• General Electric Co. (GE) said it signed a $1 billion contract to build 30 gas turbines in Saudi Arabia. Demand for power is growing in the Middle East, and GE said it has sold 188 gas turbines in 2008 and may sell about 185 in 2009, Bloomberg reported.

• Investors flocked to the U.S dollar yesterday, as it rose against the yen and euro in volatile trading. The dollar was bolstered by a flight to safety surrounding uncertainty about the final size and scope of the U.S. stimulus package. The general consensus was that the U.S. bank bailout plan unveiled on Tuesday covered the key areas needed to stem the hemorrhaging in the banking sector, Reuters reported.  In late afternoon trading, the dollar was up 0.3% against the yen at 90.53 yen. The euro was down 0.4% at $1.2848.

• General Motors Corp. (GM) is asking Sweden to guarantee $600 million in European Investment Bank loans to keep the Saab Automobile unit operating until it can be restructured for sale, Bloomberg reported, citing an anonymous source. The money, along with about $400 million (3.36 billion kronor) from GM, would allow Saab to introduce new models that would keep Saab competitive, and possibly prevent it from being put into administration or closed down. GM is trying to figure out what to do with Saab by Feb. 17, the due date for a progress report to the U.S. Treasury on how it will become viable so it can repay $13.4 billion in government loans by 2011.

• Gold soared to a 7-month high on Wednesday as investors bought gold and bullion-backed exchange-traded funds.  U.S. gold futures pushed through resistance levels just above $930 and rose $30.80 to $944.50 an ounce for April delivery on the COMEX division of the New York Mercantile Exchange. Most analysts are projecting gold to rise above $1,000 this year, as safe-haven buying and demand for gold as a hedge against inflation are expected to continue, MarketWatchreported.

• China will make its biggest ever investment in a foreign company by injecting  $19.5 billion in cash into mining group Rio Tinto Group (ADR: RTP), the Financial Times reported.  Chinalco, a state-owned aluminum producer will increase its stake in Rio Tinto to 18%, grabbing a minority share in some of its best mining assets and an issue of convertible bonds.  The deal will come under intense scrutiny from Australian politicians, who had imposed a 15% limit on Chinalco’s holdings.

Source:  Global Investment News Briefs Thursday, February 12th, 2009

The $140bn BHP Billiton move on Rio Tinto first appeared on the boards back in February. “Await documents” has been flashing ever since. There is absolutely no hope of BHP’s offer for Rio even reaching official posting stage for months.

Like any frustrated traveller, investors need some idea of what is happening. Actually there is more hope here than with BAA. At last there has been one decisive step. Being loudly broadcast is the fact that a vital regulatory stage has been reached. Permission is being applied to remove a major block from the wheels.

BHP Billiton, the world’s biggest mining group, has at last formally filed with the European Commission for clearance to take over rival Rio Tinto. This showed up in a Commission list of M&A cases last Friday.

The Commission, the European Union’s executive arm and also its antitrust regulator, set a deadline of July 4 for consideration of the deal. By that date the Commission must either approve the deal on competition grounds, open an in-depth investigation, or permit a short extension.

All sorts of points could give the Commission problems. Combining a number of BHP and Rio’s businesses would bring market dominance. So, Competition Commissioner Neelie Kroes is expected to be brought in.

Rio Tinto spurned BHP’s all-share offer very shortly after BHP announced it. The Rio line has consistently been that the bid is “ballparks” away from a fair offer.

The two companies have sparred over who had the better growth rate. Rio maintained that it expected to grow at a compound annual growth rate of 8.6% for the next seven years. BHP countered that it did not believe those numbers. In its view Rio would growth by 6% a year for the next five years. BHP, on the other hand, says it will grow at 6.9%.

Lots of people are unhappy – mainly customers

This, for sure, is no friendly takeover – the atmosphere is strongly hostile. And not just from Rio. All sorts of interested parties are doing their best to block the bid, too.

Major objectors are customers. The fear is that without competition, BHP will be able to charge whatever prices it likes. It would become a super mining major with sway over the global supply of a large number of minerals and metals.

The Chinese have taken their concern as far as buying a chunk of Rio to protect it. Earlier this year Chinalco and the US aluminium giant Alcoa bought 9 per cent of Rio in a $14bn raid. This is the largest single shareholding.

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Things had gone quiet for weeks before the EU story broke. Having started the bid with some pretty public rows, both companies went behind the scenes for the various talks that have been going on non-stop.

Informal talks have been held with regulators, and these had begun to leak out. The EU, for instance, is said to believe that the market strength of the combined company would inevitably lead to price hikes. This would slow economic growth even further. The Wall Street Journal put the cat among the pigeons by saying that the EU was really unhappy.

Both companies have also been going the round of shareholders, putting their cases directly. Some shareholders had been thinking the offer would be increased before now. No sign of any hike yet, however.

A case for asset upgrades here?

The battle moved back into the open last week. Rio held a marathon seminar in London. The aim was to show BHP’s bid as far, far too cheap. Rio wants the market to revalue its assets too, in the light of a forecast that world demand for its metals will double by 2022. Chinese growth is major factor in its new predictions.

Managing director Tom Albanese said that with each passing year “people have been taking what we believe is a more realistic view of the total China story”.

“In that environment, greenfield projects are becoming more valuable. And I think they will continue to be more valuable in the future,” he said.

Rio has been trading at a discount to the bid

His comments come as Rio’s share price traded at a discount of over 8% discount to the implied value of BHP’s offer. Mr Albanese blamed this on uncertainty about when the bid would proceed. But he stopped well short of saying that BHP’s 3.4-for-1 offer was nearing the ballpark in terms of value.

“We’ve said in the past that the board has reviewed the BHP Billiton pre-conditional takeover offer,” he said. “We took it seriously. We rejected it. We rejected it on the basis of value. Rio Tinto as a stand-alone company is worth much, much more than anything that we’ve seen presented to us.”

But he did not succeed last week in propelling the Rio share price to above the bid level.

BHP will probably wait until the regulatory processes are all finished before adding any sweeteners. Anyway, the current view is, it won’t put up its offer until posting formal offer document.

Timing? Probably late 2008 at best!

Keep mining.

Erin and Isabel

Source: Rio Investors Should Continue Waiting in the Hall

Nickel fell until the New York open, dropping below $12, rallied back, but then declined again, closing at $11.9896/lb., down 20 cents. Zinc pushed past $1.05 in the pre-dawn hours but couldn’t hold its gains and wound up losing a penny and a third, at $1.0242/lb. Aluminum fell in the pre-dawn hours but rallied back during the day to $1.31/lb., unchanged, while lead’s rebound got derailed as it shed 2½ cents, to $1.015/lb.

Copper continued to decline, dropping to a seven-week low as commodities show weakness in the face of a firming dollar that makes the metals more expensive for those holding other currencies.

“The dollar is stronger today, taking its toll on precious and base metals,” said MF Global analyst Edward Meir. “Chinese production data for the various metals for the month of April were released earlier — these show solid month-over-month and year-to-date gains.”

Data released by China’s National Bureau of Statistics showed output of refined copper rose 22.7% in April, to 329,400 metric tons, but analysts are concerned about slowing industrial growth in that country.

“The growth picture looks much worse now, with higher energy prices and a slowdown in manufacturing,” said Michael Smith, president at T&K Futures & Options in Port St. Lucie, Florida. Thus, it’s likely that, “Copper will keep dropping,” he said.

Zinc eased yesterday after Tuesday’s runup based on estimates that suggest up to 500,000 metric tons of smelter capacity could be lost to the recent massive earthquake.

“Prices may be supported by the disruptions, but damages would have to be very serious — which doesn’t seem to be the case — to cause a sustained impact on metals quotations,” said Lehman Brothers analyst Michael Widmer.

In company news, shares of BHP Billiton surged to a record high yesterday, as rumours swirled that a state-controlled Chinese firm was building a stake in the world’s biggest mining company.

Speculation is centering on Chinese aluminum maker Chinalco, already the largest shareholder in Rio Tinto, which BHP is seeking to acquire. China’s massive appetite for raw materials has it buying into sources of supply around the globe.
Source: Base Metals Retreat Further

Copper surged the most in seven weeks, closing above $4 for the first time and approaching its alltime intraday record price of $4.04, set in May of 2006.

While the uptrend was not completely unexpected, it caught many offguard.

Although global copper demand “remains strong and there are challenges to the industry to provide supplies of copper,” said Richard Adkerson, chief executive officer of Freeport-McMoRan Copper & Gold, “To have copper approaching $4 a pound is remarkable.”

Yes, as Citigroup reported this week, a “tidal wave” of $70 billion has poured into commodity markets this year from hedge funds and other investors.

And there are many who agree with Tobias Levkovich, Citigroup’s chief U.S. equity strategist, who claims there is a commodity “bubble” that is poised to burst.

But it is physical demand, not speculative investment, that is driving copper prices, says Bret Clayton, CEO of Rio Tinto Group’s copper division. “We see a very strong market,” Clayton says. “We are in a very finely balanced market, with very low stock levels.”

Maybe we should just split the difference.

“The main drivers for copper have been in place for some time,” says Ron Goodis, a of Equidex Brokerage Group in Closter, New Jersey. “There’s continuing global growth that’s been pushing demand. When you combine that with the push from speculators, you have this huge move.”

In company news, rumors continued that Baosteel, China’s biggest steelmaker, was on the prowl to acquire a muti-billion dollar stake in BHP Billiton.

And the country’s state-owned aluminum giant, Chinalco, fresh off its partnership with Alcoa in grabbing a major stake in Rio Tinto, said it is not done. It’s actively looking to pick up some more mining assets, particularly in copper.

Asked if Chinalco was looking in South America or Africa for mining projects, Xioaling Ren, the company’s vice president of marketing replied simply: “Wherever possible.”

–But demand in Australia for refined fuel products is growing faster than the current refineries can keep up with, forcing Australia to import more from refineries in Asia (especially Singapore). Australia’s seven operating refineries are listed below in a chart from a 2004 report prepared by the Howard Government called “Securing Australia’s Energy Future.”