Page last updated at 10:05 GMT, Wednesday, 24 June 2009 11:05 UK

S Africa 'to oppose Anglo deal'

Kroondal Mine chair lift to and from the surface
About 25,000 jobs have been lost in South Africa's mining industry

South Africa's government has suggested that it would reject any attempts at a merger between mining giants Anglo American and Xstrata.

Xstrata's plans for a £40bn merger would be "uncompetitive and unhealthy", said mining minister Susan Shabangu.

Anglo has rejected the approach from its Swiss-based rival, describing the offer as "totally unacceptable".

But many industry observers suggest a merger would make sense because of the vast cost savings that could be made.

Job fears

The government said that overall prices for commodities produced in South Africa had fallen by 40%, while 25,000 jobs have been lost. It thinks that a merger between the mining giants is unlikely to improve the situation.

"We are keenly watching these developments to ensure, among others, that such consolidation does not take us back to the age of anti-competitive practices, that there are no job losses and to ensure that it does not affect market principles," Ms Shabangu said.

She said that talks had not been held with either firm but added that "as a country, and as this government, as we try to create more opportunities within the industry itself, we can't go back to monopolies".

Xstrata has said the case for a union "of equals" between the two firms was "highly compelling".

But Anglo said that the proposals - which would have created a group worth more than £40bn at current stock market prices - lacked "strategic merit", citing a negative effect on its position in the platinum, iron ore and diamond markets.

It added that its current business strategy was already set to make "substantial savings".

Anglo and Xstrata both have coal mines and infrastructure in Australia and South Africa, as well as copper mining operations.

Mining firms have been hit by falling demand for metals amid the global economic downturn.

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