On 21 June 2009, Swiss miner Xstrata PLC (Xstrata) announced that it would seek a merger with Anglo American PLC (Anglo American) in order to create a world-class firm with a market-leading portfolio and scale, as well as the financial strength to fund future growth. Although we would be encouraged by synergies made possible by such a deal, we remain concerned about the company's high debt levels and volatility in global commodity markets....

We expect demand and commodity prices to remain weak in FY 2009 reflecting the bleak outlook for the global economy. However, we anticipate prices to stabilize during FY 2010, supporting top-line growth. Furthermore, with the company's major projects rescheduled to enter production from FY 2011, the long term growth prospects for the company remain strong. In addition, the company is likely to experience lower raw material costs, going forward....

On 17 March 2009, Anglo American PLC (Anglo American) announced the sale of its remaining 11.3% stake in AngloGold Ashanti Limited (AngloGold) for US$1.28 bn. We view this transaction as a positive move by the company to improve its liquidity levels. Considering the current weak demand and pricing for commodities, in addition to the reduction in the company’s capex plans, we expect to lower our estimates in our next update report. However, we believe the significant…