Xstrata in £5 billion bid for platinum producer Lonmin

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Xstrata has built an 8% stake in the company and is offering £33 a share in cash, a premium of some 42%.

Swiss-based Xstrata, the world's leading energy-coal producer and a major player in copper and nickel, says it is part of its "long-stated ambition to become a significant platinum producer".

Lonmin is the world's third-largest producer of the metal after Anglo Platinum and Impala. The firm was created 10 years ago when it was spun off from Tiny Rowland's Lonrho.

Xstrata chief Mick Davis has led an acquisition spree since 2004 that has expanded copper, nickel and coal production.

He has spent nearly £15 billion adding platinum assets, including South Africa's Eland Platinum. In 2005, he set up the Mototolo venture with Anglo Platinum to develop a mine in South Africa's Bushveld complex. But platinum makes up only 0.5% of Xstrata's revenue.

Control of Lonmin would immediately catapult it into the major league and comes at a time when the price of the metal, which is used in catalytic converters in motor vehicles, is 30% off its peak. Davis said the deal would be "an unrivalled combination of operational synergies, relevant experience and skills". It would give Lonmin shareholders an opportunity to realise a cash premium.

Lonmin was barred by the European Commission from merging with Impala in 1996, but Xstrata says it faces no significant regulatory hurdles to the acquisition.

It sought to soothe South African nerves. The country has more than 75% of the world's platinum supply.

Xstrata reported first-half net profit down 8% to $2.75 billion, after last year's figure was inflated by one-off items. Revenue was ahead 13% at $16.1 billion and the company says it expects a stronger second half.