Xstrata Acquiring Gold, Nickel Mining Firm

Xstrata plc and LionOre Mining International Ltd. has entered into a support agreement for an all-cash offer to acquire all of the issued and outstanding shares of LionOre by way of a friendly take-over bid.

The support agreement between Xstrata and LionOre provides for, among other things, a non-solicitation covenant on the part of LionOre, subject to customary "fiduciary out" provisions that entitle LionOre to consider and accept a superior proposal, a right in favor of Xstrata to match any superior proposal and the payment to Xstrata of a termination payment of about C$130 million, if the acquisition is not completed as a result of the superior proposal.

The Board of Directors of LionOre, after consultation with its financial and legal advisors, has unanimously approved entering into the support agreement and recommends that LionOre shareholders tender to the Offer. JP Morgan, acting as financial advisor to the LionOre Board, has provided an opinion that the Offer is fair, from a financial point of view, to LionOre shareholders.

Successful completion of the transaction will strengthen Xstrata’s position as a significant participant in the nickel industry, and ensure that the growth potential in the LionOre portfolio can be optimized through its combination with Xstrata Nickel’s downstream processing facilities. Xstrata Nickel will also increase its degree of vertical integration and gain geographic and technical diversification across its operations.

Colin Steyn, president and CEO of LionOre said, "We are very pleased to support this offer. The bid offers clear value to shareholders, and also positions our operations and employees as part of a growing, successful global nickel producer. This is an extremely attractive opportunity for our shareholders to lock in the substantial growth in value they have seen recently in their investment. To realize cash at this point in the commodity cycle eliminates the risk that our shareholders would remain exposed to as a stand-alone group, and enables them to realize value for their investment at a time of historically high nickel prices."

Ian Pearce, CEO of Xstrata Nickel, noted, "The combination of LionOre with Xstrata Nickel brings together two very complementary businesses and creates significant opportunity for the enlarged Xstrata Nickel business. This is an important step in our strategy to grow Xstrata Nickel into a truly global nickel business. With LionOre, we unleash opportunities to create value through additional production, strong synergy potential, access to new markets and increased opportunities for growth, and through optimization of technology. There is a unique industrial logic in the combination of these two businesses which is recognized in the price being offered to LionOre shareholders."