BREAKFAST DEALS: Stainless deal

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Riots in China aren't stopping further consolidation across the global steel industry with reports that ArcelorMittal could do a JV with South Korea's Posco. In other developments, there's a rumoured takeover by Vale of Camec, news on Avoca's bid for Dioro and much more.

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Stainless steel

ArcelorMittal could spin off its $US3 billion stainless steel business to a joint venture run with South Korea's Posco, according to the Financial Times. Although ArcelorMittal says it has "no intention" of disposing the division, a JV with the world's sixth-largest steelmaker could make sense. Another possible candidate could be Outokumpu of Finland, the FT said. Outokumpu last week reported a second quarter loss, but like its Finish peer Ruukki Group, which produces the key stainless steel component, ferrochrome, poor short-term results do not preclude buying at the bottom of the cycle. Ruukki recently announced a $466 million merger with Australia's Sylvania Resources, which mines platinum in South Africa. Sylvania is also buying at the bottom (see story on Anglo American below), acquiring both SA Metals and Great Australian Resources amid its deal with Ruukki. Such consolidation in the platinum group metals and ferroalloy sectors alike could prove to signal a turning point for mining and steelmaking investors. Echoing this, Bluescope Steel earlier this month announced plans to restart one of its two blast furnaces at Port Kembla in Wollongong, NSW. Consolidation and recovery won't be completely straightforward however, with the attempted takeover of Tonghua Iron & Steel Group by Jianlong Steel, which led to riots and the death of a Jianlong executive, being a case in point (Breakfast Deals: From Rio to riots). A recent report by KPMG in China wrote that major producers like Baosteel, Wuhan Iron and Steel Group and Angang Steel would lead further consolidation moves this year.

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Vale

Speaking of alloys, AIM-listed cobalt explorer Central African Mining and Exploration (Camec), could be in the sights of Brazilian giant Vale, according to London's Telegraph newspaper. The AIM-listed miner, run by retired England spin bowler Phil Edmonds, has said it has received approaches but has not disclosed where they are from. Vale recently raised $US1 billion, which was speculated to be as part of a greater strategy to play alongside mergers between Xstrata and Anglo American, or BHP Billiton and Rio Tinto. Cobalt is nevertheless of great interest to Vale, the Telegraph said, and the company recently opened an office in the Democratic Republic of Congo, where Camec mines its stuff. The DRC and Zambia, where Edmonds was born (though it was then of course Northern Rhodesia), are the world's top cobalt producers. Currently BHP refines cobalt in Australia, but is not believed to be interested in Camec, nor is Rio.

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Dioro Exploration

Over the gold, Perth-based Dioro Exploration is in a halt pending the announcement of the possible sale of its 49 per cent interest in the Frog's Leg gold mine to Canadian miner Northgate Minerals Corporation. Dioro flagged discussions with Northgate last Monday and disclosed the bare bones of the deal on Friday. No price was given and Dioro said it would review Northgate's conditional asset sale proposal with its advisers before making a recommendation to shareholders. It was earlier speculated that Northgate may have made a rival bid for total control of Dioro, which is also listed in Toronto, but has assets exclusively in Australia. Frog's Leg is its sole producing asset and is majority controlled and operated by La Mancha Resources, another Canadian. It can thus be assumed that Avoca Resources is the only company bidding for total control of Dioro. Avoca yesterday extended its unconditional $50.8 million all-scrip takeover offer until August 4. Avoca currently has a relevant interest in Dioro of 20.97 per cent.

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Xstrata and Anglo American

Anglo American boss Cynthia Carroll will face shareholders later this week with the company's annual results. At the presentation she will have to convince investors that there is latent value in Anglo beyond Xstrata's nil-premium merger proposal, or even beyond the extra £5 billion Xstrata is thought to be readying itself to tack on. Central to this will be the outlook for Anglo's key platinum and diamond operations. Although an iron ore development at Minas Rio in Brazil may change Anglo's commodity mix in a few years, currently its Anglo Platinum arm, likely to make a loss this year, and 45 per cent investment in De Beers, expected to make no profit, are weighing thing down. The two commodities have been especially impacted by the financial crisis with demand for jewellery sinking. Then again, a countercyclical trend may have been spotted by Women's Health magazine, which reports that the longer recession-worried workers stay back in the office the more likely they will have an affair with a colleague. Approximately one third of women surveyed already have a crush on someone they work with. Taken to its logical conclusion, this could hopefully mean greater diamond and platinum demand for Anglo American.

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AngloGold Ashanti

Speaking of South African mining companies that start with the word Anglo, AngloGold Ashanti could soon make some further acquisitions down under, The Australian suggests. AngloGold is presently undertaking a scoping study on Midas Resources' Fortitude deposit in Western Australia, nearby the 8 million ounce Sunrise Dam deposit. AngloGold is also commencing a feasibility study for the Tropicana mine, also in Western Australia, northeast of Kalgoorlie, alongside 30 per cent investor Independence Group. In Africa, AngloGold is also party to a bid for Moto Goldmines in the Democratic Republic of Congo. As reported here earlier, the former ASX-listed Moto received a $US488 million cash-and-scrip offer from Anglo and Randgold Resources, trumping a rival all-scrip offer worth $US428 million from Vancouver-based Red Back Mining. As mines in the famous Witwatersrand region of South Africa run low, miners like AngloGold will have to increasingly look offshore for future projects.