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Resource Pacific Rejects Xstrata's Bid

Australian coal miner Resource Pacific on Friday advised shareholders to reject a A$960 million ($842 million) bid from Swiss-based mining group Xstrata, saying the offer was "neither fair nor reasonable".

Resource Pacific said in a statement that an independent assessment had valued the firm's share at between A$3.56-A$4.09 a piece, with a preferred value of A$3.82 a share.

Xstrata in December launched a A$960 million cash bid for Resource Pacific, offering A$2.85 for each of Resource Pacific's shares, and trumping an all-share offer by smaller coal miner New Hope.

"In the opinion of your directors, the Xstrata offer is inadequate," Resource Pacific's chairwoman Carol Holley said in a statement to shareholders.

Shares in Resource Pacific, which has a market value of about A$996 million, ended flat at A$2.96 on Friday.

The Sydney-based company said it was first put in play by New Hope's "opportunistic" bid, which came as a substantial investment programme undertaken over the past three years was about to start unlocking value in the local miner.

Under the expansion plan, Resource Pacific will see its production double to 8 million tonnes of coal a year by 2010.

"Xstrata is now seeking to benefit from your company's strong position and growth plans without offering you adequate payment for your shares," Holley said.

Resource Pacific operates a single mine, Newpac, in the Hunter Valley region of New South Wales state.

The tussle for Resource Pacific is the latest in a string of deals in the sector in recent months, after coal prices doubled on surging Asian demand.

Last year, Centennial Coal agreed to sell its Anvil Hill project to a unit of London-listed Xstrata for A$425 million.

New Hope, which first launched a bid for Resource Pacific in September, offered 0.94 of its own shares for every Resource Pacific share. The bid valued Resource Pacific at around A$774 million -- nearly a fifth below the Xstrata's rival offer.