Metals, mining stocks climb on more merger speculation

Metals, mining stocks climb on more merger speculation

Speculation about more megamergers and an extended business cycle for metals and mining companies helped drive the industry’s stocks higher Monday.

The expected merger of the world’s two largest steelmakers – Mittal Steel Co. and Arcelor SA – looks more certain after a shareholder vote to reject a competing transaction. Mittal is based in Rotterdam, Netherlands, and Arcelor is based in Luxembourg.

Meanwhile, Phoenix-based Phelps Dodge Corp. has a friendly agreement to buy Canadian miners Inco Ltd. and Falconbridge Ltd. in a two-tiered deal.

It appears the merger snowball is rolling, and investors are expecting it to pick up speed and collect a few more of the companies in the group.

Rumors of a possible takeover of Australia’s Alumina Ltd by other Australian mining giants Rio Tinto or BHP Billiton Ltd. led JPMorgan to say a deal to buy all of U.S. aluminum producer Alcoa was more likely.

Alumina interests in assets of Alcoa’s alumina business, as well as exclusive agreements between the two, make a roll-up of both companies more likely, analyst Michael Gambardella said in a note. (JP Morgan has done investment banking for BHP Billiton and Alcoa.)

Shares of Pittsburgh-based Alcoa, which only recently has been able to cash in on the strong market for basic materials, climbed 73 cents, or 2.3 percent, to finish at $33.09 on the New York Stock Exchange.

Alumina’s American Depositary Shares were up 63 cents, or 3.1 percent, to finish at $20.73 on the NYSE. American Depository Shares representing BHP Billiton and Rio Tinto shares also were higher. The BHP Billiton shares rose 84 cents, or 2 percent, to close at $43.91, while the Rio Tinto shares rose $4.82, or 2.3 percent, to finish at $214.53.

Also in the aluminum industry, Goldman Sachs recommended investors move into shares of Century Aluminum Co. ahead of its July 27 earnings announcement. Century has the best chance of an upside earnings surprise in the sector because of lower natural-gas costs and higher production, analyst Aldo Mazzaferro said. (Goldman Sachs has done investment banking for Century.)

Shares of Century were up $3.34, or 9.4 percent, to close at $39.03 on the Nasdaq Stock Market.


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