Congo copper deal opens the door to opportunity

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 01 Dec 2011   Posted by admin


CHINA Minmetals has completed a successful $1.3 billion takeover bid for Congo-based copper producer Anvil Mining after gaining the approval of the Anvil board and its major shareholder, Trafigura Beheer.
Minmetals Resources (MMR), the company’s Hong Kong-listed arm, will pay C$8 per share under the friendly takeover bid, which represents a 39 per cent premium on Anvil’s last traded price on the Toronto Stock Exchange.
The news came after Anvil refuted media speculation that an unnamed Chinese company was looking for a potential takeover in early September. “In response to the Australian media, Anvil confirmed today that it is unaware of any undisclosed material developments in respect of its business and affairs,” the company said in a statement on September 15. Anvil’s key asset, the Kinsevere mine in the Democratic Republic of Congo, is expected to add 60,000 tonnes of copper cathode to MMR’s total annual copper output, boosting it by about 60 per cent. Kinsevere is estimated to have a 14-year mine life, and has recently gone through a $400 million upgrade with the aim of increasing production from 38,000t to 60,000t levels.
The high-quality deposit is in the 450 kilometre-long Katanga Copper Belt, which stretches across Zambia into the Congo and contains more than a tenth of the world’s copper reserves. “MMR can leverage off its significant experience in similar operations, such as its Sepon project in Laos that will produce around 80,000t of copper cathode in 2012,” MMR said in a statement. Anvil is an excellent fit with the copper-hungry MMR’s strategy to build an international and diversified base metals company.
“We believe this acquisition, which will expand MMR’s global footprint and add a pure copper play to our diversified portfolio, will propel us further along that path,” MMR chief executive officer and executive director Andrew Michelmore said.
This has been MMR’s second attempt to take over copper assets this year, after its controversial bid for African miner Equinox. It eventually lost out to a $7.69 billion
cash bid submitted by Barrick Gold, the world’s largest producer of gold. MMR chief financial officer David Lamont said the company would actively seek future merger and acquisition deals in the $1 to $6 billion range in a bid to become a mid-tier producer, with the market downturn opening the door to future opportunities.
“Our aspiration is to see ourselves in the next three to five years growing into one of the top mid-tier mining companies,” Mr Lamont said. “We feel that we are underweight in copper. Copper is a market that we see through the medium to long term as being very strong.” Meanwhile, speculation now surrounds Tiger Resources after its biggest shareholder, Trafigura, orchestrated the Anvil takeover.
Trafigura stands to profit substantially from the Anvil deal. In 2009, it took a 36 per cent stake in Anvil for $100 million at C$2.20 per share, and looks set to make about C$5.80 per share (a 360 per cent profit) from its investment.
Trafigura bought a 26 per cent stake in Tiger at 22.5 cents per share, with prices currently around the 42 cents mark. Tiger, like Anvil, is Perth-based and in pursuit of copper in the Congo. Tiger’s Kipoi project, which began producing in April, lies in the Katanga Copper Belt and is about 60km from Anvil’s Kinsevere operation.

 

By Reuben Adams


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