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Xstrata bid may place uranium mines under for -

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Xstrata bid may place uranium mines under foreign control

Reporter: Tim Lester

KERRY O'BRIEN: The battle for the world's richest uranium mine shifted gear today as Swiss-based
Xstrata sharply increased its hostile bid for Australia's Western Mining. At issue: control of
South Australia's Olympic Dam, the giant copper and uranium mine at Roxby Downs. Xstrata's offer
adds $1 billion to the stakes, making it an $8.4 billion takeover bid, with at least one other
bidder likely to emerge in the near future. But the battle is as politically sensitive as it is
big. Are Australians willing to see the giant among our uranium mines handed to foreign control?
That's an issue Federal Treasurer Peter Costello will weigh as he decides to whether to approve
Xstrata's bid. I'll speak to the Treasurer shortly, but first, business and economics editor Tim
Lester looks at the arguments around Olympic Dam.

MARC GONSALVES (XSTRATA CORPORATE AFFAIRS): We are a serious acquirer of WMC.

MIKE RANN (SOUTH AUSTRALIAN PREMIER): This is a massive world-class resource.

DAVID NOONAN (AUSTRALIAN CONSERVATION FOUNDATION): Uranium's essentially the asbestos industry of
the 21st century.

TIM LESTER: The battle for Olympic Dam is on. Mining giants have been called to bid for control of
the huge desert mine at South Australia's Roxby Downs. It's a corporate joust that raises a raft of
questions about the role Australia will play as the world's richest source of uranium.

MARC GONSALVES: I doubt there is any company that is more motivated to bring on the growth and
potential of Olympic Dam than Xstrata, because...

TIM LESTER: When we spoke with Marc Gonsalves, Xstrata's London-based corporate affairs head, his
company's hostile offer for Australia's Western Mining Corporation, or WMC, stood at $6.35.
Overnight, Xstrata issued a statement from its Swiss headquarters lifting that offer to $7.20.

VICKI BINNS (MERRILL LYNCH): I really believe that this is now game on for the decision for Western
Mining takeover.

TIM LESTER: The head of mining research at Merrill Lynch Australia, Vicki Binns, had not expected
other major mining players to vie for WMC until Xstrata got serious with its offer.

VICKI BINNS: Now, this means they've got to actually get into action, play their cards - are they
interested, are they not interested - and we should see the game move pretty quickly from here on,
up until the expiry date of Xstrata's bid on February 28.

TIM LESTER: Roxby Downs and its giant mine are already etched in recent Australian history, not for
Olympic Dam's No. 1 earner - copper - but for the fact that it holds a third of the world's known
uranium. More than 20 years ago, the Hawke Government looked here, 500 kilometres north of
Adelaide, as it forged Labor's three-mines policy. It capped the number of uranium mines, but not
the chance to exploit the biggest uranium deposit of them all.

DAVID NOONAN: Roxby Downs is already the largest uranium deposit in the world. Australia's
collectively exporting some 20 per cent of the world's nuclear fuel supply.

TIM LESTER: The Australian Conservation Foundation's David Noonan is one voice to claim that the
takeover is against our national interests.

DAVID NOONAN: We would be at least partly responsible for having made the choice for short-term
profits to place other communities around the world at risk, both through the intractable nuclear
waste burden, the unresolved issues of nuclear waste, and the potential increasing risk that we
face in this era from terrorism or sabotage.

TIM LESTER: Nuclear energy supporters are also playing to the notion of national interest, of
maintaining Australian control. If there are national interests at play, the Federal Government can
thwart this or other bids under the Foreign Takeovers Act.

JOHN HOWARD (PRIME MINISTER): Companies often, in order to advance their own argument, identify the
national interest. It's the role of government to make decisions about the national interest in an
objective and dispassionate way.

MARC GONSALVES: I have struggled, as we all have in Xstrata, to try and understand what the
national interest argument against Xstrata is in respect of the acquisition to WMC, and we can't
find one.

TIM LESTER: The Australian Conservation Foundation argues there's a national interest because of
what it expects to happen with our uranium. It says that mining companies are calculating their WMC
offers based on a huge increase, perhaps a doubling, in uranium exports. Uranium prices had been
depressed for years, but in the last three years, they've almost trebled. Even Xstrata admits that
Australian uranium is a key part of Olympic Dam's attraction.

MARC GONSALVES: It's at the moment something like 20 per cent of the revenues and earnings of
Olympic Dam, so it is clearly an important commodity, along with nickel and copper, if you're
trying to assess the value of WMC.

VICKI BINNS: The big issue with uranium is you've got production of around 50 tonnes a year and
consumption of about 80, and the difference has been made up by Russian stockpiles. Now, those
stockpiles are ever dwindling, and there has been much tightness in demand in the market, with many
producers, including Western Mining, talking about people wanting to lock in very long-term
contracts.

TIM LESTER: Western Mining board members spent this afternoon locked in WMC's Melbourne
headquarters weighing the new Xstrata offer. The company is declining to comment while it
deliberates, but it too is talking up a huge expansion of Olympic Dam, to the delight of South
Australia's Labor Premier.

MIKE RANN: We know that Western Mining is proceeding apace with exploration. We know that Western
Mining want to double the size of the ore body, if everything is proven up, so we have great
confidence in Western Mining and its leadership.

TIM LESTER: Xstrata too is expansionary in its tone, but hints that Western Mining is overselling
expansion plans to try and fight off the takeover.

MARC GONSALVES: There is no feasibility study or pre-feasibility study yet on the expansion of
Olympic Dam.

MIKE RANN: We're very confident - very confident - that Western Mining will be able to announce a
major expansion of the mine over the next 12 months or so.

TIM LESTER: And who will buy the extra uranium it mines? This is where real political heat comes
into any Olympic Dam expansion. Australia has stringent rules to prevent our uranium finishing up
in weapons programs, and we monitor where it's used. But the tempting new markets for uranium are
the emerging big energy users: India and China.

RON HUISKEN (STRATEGIC AND DEFENCE STUDIES CENTRE): The tricky bit with both China and India, of
course, is that they are nuclear weapon states.

TIM LESTER: Ron Huisken is with Canberra's Strategic and Defence Studies Centre.

RON HUISKEN: China's already demonstrated a keen interest, indeed, a preference for Australia, if
you like, as a reliable source of its energy needs.

VICKI BINNS: There are plans afoot and the Australian Government is looking at expanding the
countries to which Australian producers can sell uranium to potentially including China.

DAVID NOONAN: They would be willing to sell to China or even to India, which is not a signatory of
the non-proliferation treaty, for instance. India is essentially a rogue nuclear weapons state, but
these companies wouldn't distinguish if they could get away with it.

TIM LESTER: With WMC declining to comment today, it has not addressed that point, but Xstrata most
certainly has.

MARC GONSALVES: Xstrata would obviously abide utterly and completely by the very effective
regulations that the Commonwealth Government has put in place.

TIM LESTER: The first tough call, though, rests with Treasurer Peter Costello: to give Xstrata a
green light or to find there is a national interest in stopping the takeover. In 2001, he blocked
Shell's bid for Woodside Petroleum. Having done it once, he might be loath to wave down another
foreign takeover locomotive. Though if that's his decision, there are plenty of national interests
the Treasurer can appeal to.

DAVID NOONAN: We are heading for increased company control over uranium mining in Australia.

MIKE RANN: The State and national interest is that we want to see this ore body developed. It will
create thousands of jobs. It also means, of course, a massive export future for the industry.

KERRY O'BRIEN: Business and economics editor Tim Lester.