AS Britain and the EU are set to tighten sanctions against Zimbabwe, companies outside the EU zone are set to take advantage of their withdrawal to clinch lucrative deals as they weather the storm in Zimbabwe.
One such company that has come under pressure from Britain is Rio Tinto - a combination of two companies: Rio Tinto plc, based in the UK, and Rio Tinto Limited, based in Australia with mining investments in Zimbabwe. The company controls a diamond mine, Murowa, in Zimbabwe, which is a key part of the company's $1-billion (U.S.) a year diamond business.
As pressure mounts from the E.U. to withdraw from Zimbabwe, a rival company, BHP Billiton (the world's largest primary resources company) has been looking to replace Rio at Murowa.
BHP was created in 2001 by the merger of Australia's Broken Hill Proprietary Company (BHP) and Billiton company, which has South African background.
BHP “is reported to be in hot pursuit of Rio and any shift in sentiment among Rio investors will be exploited to the hilt by Marius Kloppers, BHP's boss,” said a recent media report.
“Rio rebuffed a 3-for-1 share proposal from BHP last year. In February, BHP upped the ante to 3.4-for-1. This offer, too, was sent packing, but Mr. Kloppers shows no sign of giving up. He is especially keen to combine the two companies' iron ore assets as the Chinese pounce on every available tonne.
“In the meantime, the proposed BHP-Rio combo has been sent to the competition regulators around the world (Eurofer, Europe's steel lobby, has said the combined company would control 37 per cent of the world's seaborne iron ore trade).”
It is reported that Rio might be forced to close shop soon and open way for BHP as it faces pressure from the E.U.
The sinking share price is also said to have been induced by activity on the U.K. stock market.
“It is down by a hefty 35 per cent since the May high in London trading of 7,167 pence ($143.90 Canadian; BHP's is down too, but by a smaller amount - about 25 per cent).”
Rio’s price is said to be down because of what speculators in London are calling ‘the Mugabe risk’ and the ‘grim situation’ in Zimbabwe. Investors are said to be acting ‘irrationally’ in relation to Zimbabwe.
Critics of sanctions against Zimbabwe have always argued that they will never work, because as other companies step out, others step in.
Last week we reported that asAnglo-Dutch oil giant Royal Dutch Shell Plc. has pulled out of Zimbabwe, South Africa's Engen Petroleum bought the 50 percent stake in a joint venture with British Petroleum.
The Chinese are also reported to be eyeing lucrative deals that are coming up in Zimbabwe and Anglo-American companies leave.
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N/a • N/A Subject: Which critics Wed, 16 Jul 2008 05:32:33 • Nancy, you should avoid making such statements. Which critics said that sanctions will not work because when other companies leave others step in? In other words you are saying sanctions are a non-event, like what the government was telling us when they were imposed?
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