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Rio Tinto rejects BHP Billiton bid
February 14, 2008
London—Rio Tinto has rejected a reported $147 billion buyout offer from larger rival BHP Billiton, which made its second offer for the company.
"As you know, we recently received a pre-conditional offer from BHP Billiton to acquire all of the shares in Rio Tinto," Rio Tinto Chairman Paul Skinner said in a press release issued on Wednesday as part of its earnings statement. "After careful consideration, our boards have unanimously rejected the offer on the basis that it is not in the best interests of shareholders. BHP Billiton's offer, while improved, still fails to recognize fully the underlying value of Rio Tinto's quality assets and prospects."
The earnings statement reported that annual production records had been set for iron ore, bauxite, aluminum, refined gold and refined copper, on a year-over-year basis.
Regarding its diamond business, Rio Tinto noted that the Christmas holiday period in the United States was assessed as "generally weak overall, with many jewelers reporting declines in sales compared with 2006."
Nevertheless, demand for higher-quality diamonds is expected to continue this year, the statement said.
"The tight supply outlook for rough diamonds is expected to lead to healthy demand in 2008, especially for better-quality rough diamonds," the release said "In the cutting centers, manufacturers' margins are likely to remain under pressure, due to a weak U.S. dollar and rough price growth outpacing polished prices."
At the Argyle mine in Australia, earnings of $87 million were $23 million above 2006, mainly as a result of higher rough sales, higher prices for its polished pink tender prices and a one-off tax benefit, the company said.
At Canada's Diavik mine, earnings of $193 million were $54 million above 2006, with the effect of the stronger Canadian dollar more than compensated for by higher production.
Earnings from the Murowa mine in Zimbabwe were $3 million, which was $7 million below earnings in 2006. Rio Tinto attributed the decline to lower production volumes arising from a strategy to increase stripping to improve the mining pit's stability.
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