Lonmin says to contest Xstrata bid vigorously

By Mark Potter

LONDON (Reuters) - South Africa-focused platinum producer Lonmin (LMI.L) said on Thursday it would vigorously contest a $10 billion (5.1 billion pound) bid approach from miner Xstrata (XTA.L), but gave little sign of what steps it might take in its defence.

Swiss-based Xstrata said on Wednesday it was planning a 33-pounds-a-share bid for Lonmin, the world's No.3 platinum producer, to diversify its business from industrial metals such as copper.

Although at a 42 percent premium to Lonmin's closing share price on Tuesday, Lonmin said the proposal was far too low after the shares have lost a third of their value since May.

"This is an opportunistic move by Xstrata which attempts to capitalise on the current volatility in financial and metal markets. Lonmin will contest this approach vigorously," Chairman John Craven said in a statement.

"It undervalues Lonmin's unique business and fails to deliver appropriate value for Lonmin's shareholders."

The takeover battle is the latest in a mining industry where cash-rich companies are battling to gain control of scarce supplies to serve soaring demand, particularly from China. Sector leader BHP Billiton (BLT.L) is battling to buy No.2 Rio Tinto (RIO.L), while Xstrata itself recently attracted takeover interest from Brazil's Vale (VALE5.SA).

Analysts are divided whether Xstrata needs to bid more, with some seeing little chance of a counterbidder and pointing to Lonmin's succession of recent operational setbacks.

On Wednesday, Lonmin cut its forecast for refined platinum sales for the year ending September for the third time. It now sees sales of 725,000 ounces, down 6.5 percent from its previous target and compared with its initial forecast of 900,000 ounces.