Xstrata has been handed a three-week deadline for firming up its interest in a merger with Anglo American, it was confirmed yesterday (1st October).

The diversified Swiss miner has reaffirmed its intentions to thrash out a deal after its initial all-share 'merger of equals' proposal was rejected by Anglo in June.

However, the Takeover Panel, which regulates mergers and acquisitions in the UK, has given Xstrata until 17:00 BST on 20th October to 'put up or shut up' with a formal offer.

Anglo American had already outlined its disapproval of Xstrata's "totally unacceptable terms" and has now stated again that the link-up would provide no strategic advantages.

"We have made our position on Xstrata's proposal very clear and we welcome the panel's decision today," said Chairman Sir John Parker.

Under the terms of the ruling, Xstrata can now either back up its proposal with a formal offer, attempt to improve the deal with the promise of extra cash or withdraw its interest.

The company has indicated that it could provide an additional $1 billion (£630.8 million) in annual cost savings for the new entity created by any merger with Anglo American.

However, market observers have queried this claim, particularly as Xstrata has been forced to raise $6.5 billion in new shares this year to service its debts of $13.1 billion.

Anglo shareholders supported the rejection but now hope Chief Executive Cynthia Carroll can demonstrate that the firm still offers value as an independent company.

Meanwhile, reports emerging yesterday suggested that Lonmin, which is the world's third-largest platinum producer, could be on the verge of making a cash call.

The South African miner has been pinpointed as a potential alternative target for Xstrata, particularly in the context of the latter's removal from Takeover Panel restrictions.

However, it agreed an $82 million indemnity deal with Impala Platinum five years ago and sizeable repayments due for the end of last month are believed to be in default.

"This comes at a time where Lonmin's cash flow is under stress," Liberum Capital analyst Michael Rawlinson told the Financial Times.

"We believe a Lonmin cash call represents the passage of least resistance for Impala to recover its debt."

Mr Rawlinson added that Xstrata is unlikely to be able to finance a deal for Lonmin until spring 2010 at the earliest as a result of those commitments.

Xstrata was founded in 1926 and its copper division is the world's fourth-largest producer of the metal.

Sources:

Xstrata given deadline for Anglo bid (01/10/09)

Lonmin falters on fear of cash call (01/10/09)

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