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Xstrata drops bid for platinum miner Lonmin

2 hours ago

ZUG, Switzerland (AP) — Anglo-Swiss mining giant Xstrata PLC dropped its US$10 billion bid for British rival Lonmin PLC on Wednesday, saying the turmoil on the financial markets makes a takeover of the world's No. 3 platinum producer too risky.

The decision sent Lonmin shares tumbling 20 percent to 1,810 pence (US$32.26) on the London exchange. Xstrata stock rose 6.2 percent to 36.65 Swiss francs (US$32.78) in Zurich.

"The current lack of clarity and certainty regarding the future availability of credit introduces significant risks into the financing package available to Xstrata," the company's chief executive, Mick Davis, said in a statement posted on its Web site.

The Zug-based company had planned to partly finance the takeover with bank loans.

The announcement was made the day before the deadline set by British competition authorities for Xstrata to make a firm offer or walk away.

Lonmin had resisted the hostile takeover approach made by Xstrata in August, urging shareholders to hold onto their stock because the bid "fundamentally undervalues the Company's unique assets, resources and reserves."

Xstrata said it currently holds almost 10.7 percent of Lonmin's shares, and under British competition rules it can increase its stake to 29.9 percent without making another takeover bid, which it is barred from doing for the next six months unless a rival offer is made.