4th UPDATE: China Zijin Mining Makes A$545 Million Bid For Indophil
01 Dezember 2009 - 8:02AM
Dow Jones News
China's biggest gold producer, Zijin Mining Group Co. Ltd.
(2899.HK), has made a A$545 million takeover bid for Australia's
Indophil Resources NL (IRN.AU), seeking to gain access to the
US$5.2 billion Tampakan copper-gold mine in the Philippines.
Tampakan is "a world-class copper-gold deposit … (with) an
annual production rate of 340,000 (metric) tons of copper in
concentrates and 350,000 ounces of gold (about 10.89 tons)," Zijin
said in an official filing to the stock exchange, terming the
Philippine asset as the key draw of the deal.
Tampakan would boost Zijin's resource reserves and the security
of supply to Zijin's copper refining, Chairman Chen Jinghe said in
the statement.
The news gave an instant boost to the share price of both
companies as analysts speculated the deal is unlikely to face
regulatory and other hurdles as Indophil's key asset is outside
Australia. At 0426 GMT, Indophil shares were up 10.6% to A$1.20, in
a broader Australian market that was up 0.2% while Zijin shares
were up 5.6% to HK$8.58 in a broader market which was up 0.5%.
Deutsche Bank analysts said the acquisition looks positive for
the Chinese group as it helps it diversify geographically and
widens its exposure to a broader range of metals.
Indophil said its directors have recommended the offer, which is
pitched at A$1.28 a share and represents an 18% premium to the last
trade in Indophil shares and an 83% premium to their average price
over the past six months.
Indophil's biggest shareholder and Tampakan's majority owner,
Xstrata PLC (XTA.LN), has already entered into a pre-bid agreement
with Zijin, giving the Chinese group control of its 19.99% holding
in Indophil, subject to a higher offer emerging.
The deal would give Zijin a 34.2% stake in Tampakan with the
right to raise this further to 37.5%.
Indophil Chairman Brian Phillips said the deal unlocked value
for the company's shareholders and was a positive for the project
as Zijin was well placed to fund its share of the US$5.2 billion
development.
"The Zijin proposal recognizes Tampakan's inherent value and
follows a comprehensive ownership review process in which the
board, management and advisers have considered a range of strategic
alternatives and proposals from interested parties," he said in a
statement.
Xstrata Copper Chief Executive Charlie Sartain said Zijin's
offer clearly demonstrates the attractiveness of the Tampakan
project.
"Xstrata welcomes the introduction of a joint venture partner
with the capacity to support the advancement of the Tampakan
project," he said in a statement.
Tampakan has an estimated mineral resource of 2.4 billion metric
tons of ore containing 13.5 million tons of copper and 15.8 million
ounces of gold.
A feasibility study into the project is due to be completed in
the second quarter of 2010 with first production planned in
2016.
Indophil said that, based on current estimates, Tampakan is
expected to have an average annual production rate of 340,000 tons
of copper and 350,000 ounces of gold in its first 20 years of
operation.
A earlier takeover bid by Xstrata, also pitched at A$1.28 a
share, was last year rebuffed by the Indophil board, but since then
Indophil's shares have been savaged, falling as low as 22.5 cents
in January from a peak of A$1.40 in 2008.
The shares have since staged a partial recovery after Indophil
revealed that a number of parties had expressed interest in buying
its Tampakan stake.
The latest offer is conditional on Zijin winning a 90% stake in
Indophil and getting Australian and Chinese regulatory
approvals.
Australia's Foreign Investment Review board had previously
approved both Xstrata's bid for Indophil and a rival proposal
backed by Hong Kong merchant bank Crosby Capital Ltd.
(8088.HK).
Some analysts, however, say Zijin is taking on risk associated
with the delivery of the Tampakan project, with the mine still in
the feasibility stage and located in the politically unstable,
southern part of the Philippines.
"Uncertainties exist as to whether (the mine) can be brought to
production capacity. The key concerns surrounding the project are
political and community relations," Zijin said in its filing to the
exchange, warning that "profitability and results of Zijin may be
affected if the Tampakan Project cannot be brought to production
capacity within this expected time frame (by 2016)."
(Chuin-Wei Yap in Beijing contributed to this report.)
-By Alex Wilson, Dow Jones Newswires; 61-3-9292-2094;
alex.wilson@dowjones.com
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