Fitch cautious on mining merger

RATINGS agency Fitch said yesterday it would not raise its credit rating on a combined group made up of Anglo American and Xstrata, despite widespread approval from analysts.<br /><br />Anglo, led by chief executive Cynthia Carroll, turned down Xstrata&rsquo;s nil-premium &ldquo;merger of equals&rdquo; last week, slamming its &ldquo;lack of strategic merit,&rdquo; and saying the terms of the deal were &ldquo;totally unacceptable&rdquo;.<br /><br />But industry experts backed the merger, welcoming the &pound;1bn synergies Xstrata says it can make.<br /><br />Combined, the companies would create a global mining group worth more than $40bn (&pound;24bn).<br /><br />But Fitch said both companies&rsquo; existing credit profiles were under pressure, and that it forecasts their operating performances will be weak over the next years, because commodity prices will be slow to recover. <br /><br />It also raised concerns that a tie-up, if led by Xstrata boss Mick Davis, would be of a higher risk, because of Davis&rsquo; reputation for aggressive acquisitions.<br /><br />Meanwhile, it is understood that Anglo has entered into talks with Dubai Natural Resources World about a partnership to develop its Brazilian iron ore assets. The talks come after discussions with unnamed Chinese groups.<br /><br />Anglo is looking for a partner for its Brazilian assets, and is seeking to build its strength as it fends off the Xstrata bid.<br /><br />Anglo is understood to be looking for around &pound;2.1bn of investment to develop the MMX-Minas Rio project.<br /><br />It bought the South American project last year, and is now studying plans to sell off part of its stake to raise the money it needs to start production there.