eqn takeover, page-32

Interesting. Here is the article.

MINE, ALL MINEIt's two weeks since Equinox Minerals unveiled a $1.2 billion offer for Citadel Resources. While the bid has been recommended by the Citadel board, there's a growing band of shareholders who are less than delighted with the largely scrip-based offer.

Leading the investor backlash is Petra Capital, a firm that has raised $340 million for Citadel in the past three years. Petra's argument is that Citadel's high-quality Saudi Arabian project is set for a re-rating over the next 12 months as the company moves to full production.

There's a lot to like about the project. As the first Western mining company to set up shop in Saudi Arabia, Citadel has cherry-picked the Saudi copper deposits explored by the French in the 1960s and 1970s, identifying a resource with

2 per cent copper. In addition, the local infrastructure is in place, Saudi Arabia has no mining royalties or income tax, and the corporate tax rate is just 20 per cent.

Petra values Citadel at 62? a share, while the Equinox offer is worth about 51? at present share prices. And that's if you believe that Equinox is fairly valued by the market at the current share price of $5.72. Petra doubts that Equinox can meet its annual production target of 175 thousand tonnes of copper production from its Lumwana project in Zambia. According to Petra, 136,000 tonnes is a more likely result.

The valuation concerns have motivated Citadel's institutional investors to actively solicit higher offers. There are a number of contenders, with all of the global diversified miners now showing strong interest in Saudi Arabia.

While it's early days, another possible result would be for Equinox to sweeten the deal with a larger cash component. Another 20? a share should be enough to win over the doubters