Swiss diversified mining group Xstrata may see its $428 million takeover offer for Sphere Minerals slip away after shareholders began pulling their acceptances. The Swiss mining giant was forced to raise its offer after a Singapore firm bought into Sphere Minerals, putting the deal at risk.

Sphere Minerals, a West Africa-focused iron ore company, is listed on the Australian Securities Exchange.

Singapore-based Sin-Tang Developments, early this month, acquired 8.6 per cent of Sphere. Sin-Tang, which is 95 per cent backed by three Chinese businessmen, had last week upped its stake to a blocking 10.77 per cent.

Xstrata, based in The Lug, Switzerland, today said it would allow its $2.50 per share bid to lapse if it failed to get 50 per cent stake in Sphere before the bid closed on 12 November 2010.

Xstrata also saw its holding in Sphere fell this week to 8.21 per cent from 8.38 per cent, after Xstrata extended the offer period from 29 October to 12 November 2010. Directors of Sphere, who hold around 5.46 per cent stake, had committed to Xstrata's offer.
In order to lure Sphere shareholders, Xstrata made its offer unconditional and reduced the payout time to Sphere shareholders from five business days to three business days.

On 24 August, Xstrata had proposed to acquire Sphere for A$2.50 per share in cash, valuing the iron ore explorer at approximately A$428 million ($383 million). (See: Xstrata to buy iron ore explorer Sphere Minerals for $383 million)

Xstrata had said that its offer would require 90 per cent acceptance of Sphere's shareholders.

West Perth, Australia-based Sphere has interests in three iron ore projects in Mauritania, West Africa.

It has 50:50 joint venture with Société Nationale Industrielle et Minière (SNIM), Mauritania's state-owned iron ore producer in the large-scale Guelb el Aouj iron ore project.

Sphere also owns a 100-per cent interest in the Lebtheinia project, and a 100-per cent interest in the Askaf project located 35km south of the Guelb el Aouj project area. The company recently secured three large-scale iron ore projects in Mauritania.

Sin-Tang, which is headed by Chinese iron ore trader Yuzheng Xie and has steelmakers that include Tianjin Metallurgy Group and Tangshan Ganglu Iron & Steel Co as major investors, has said that Xstrata's offer is not the best option for Sphere shareholders.

Sin-Tang is reportedly willing to pump in as much as $540 million for Sphere's fully owned Askaf iron ore project.

Even if Xstrata is able to get 51 per cent of Sphere, it will still have to contend with Sin-Tang, which currently holds 10.77 per cent stake.