old news but interesting for small companies

Miners fill shopping lists

21st December 2007, 8:45 WST










WA’s mining sector is bracing for a fresh onslaught of takeover bids next year after one of the most aggressive acquisition sprees on record.

With Consolidated Minerals, Jubilee Mines, LionOre Mining International and Summit Resources gobbled up in deals worth $12.5 billion this year, and a raft of other miners in the takeover crosshairs, investment bankers expect the global search for quality resource assets to maintain its extraordinary pace and WA focus.

Most of WA’s mining sector companies, in particular those that have moved from exploration into production, are expected to be on the radar screens of bigger, mostly foreign, predators over the coming year.

The takeover spree, already dubbed “exceptional” and one of the most amazing in the past 20 years, has prompted one investment banker to label any WA miner worth more than $500 million a potential takeover target.

Nickel producers Western Areas, Independence Group, Mincor and Sally Malay as well as uranium market leader Paladin Resources are top of the likely hit list. Investment bankers say less-advanced players like Conquest Mining and Moly Mines, which both own big undeveloped resources, could also attract bids.

“A lot of companies have wised up lately and they do have a (takeover defence) plan on standby,” one senior investment banking source said.

The escalating takeover activity is also likely to quash any hope of a home-grown miner graduating to the global ranks of mid-sized metal producers. Instead, players like Jubilee (being taken over by Xstrata in a deal worth $3.1 billion) are being gobbled up by bigger players.

“We are not encouraging any approaches but inevitably we are prepared in that regard,” Western Areas managing director Julian Hanna said.

“The nickel industry is such a small business, there’re such a small number of players in it, we are very conscious about our position and what our peers are doing and we watch all that daily.”

The takeover frenzy is proving a boon for investment bankers, who say they are being inundated with mandates to either size up takeover targets or prepare companies’ defences in anticipation of a possible bid.

The advisers urge miners to increase stakeholder communications and ensure shareholders remain fully informed not only of operational performance, but also growth potential.

“We have advised a number of companies on how to prepare themselves in the event someone comes over the parapet,” Argonaut Securities executive chairman Charles Fear said.

Mark Barnaba, managing director of Azure Capital, which is focusing increasingly on the resources sector, said miners often became takeover targets after struggling to make the transition from explorer to producer.

With the transition often proving more difficult and complex than anticipated, resultant share price weakness could easily turn the miner into a vulnerable takeover target.

He said because established miners were keen to expand their operational base many of WA’s single-asset, small scale operators were likely takeover targets.

“For a producer of that half a billion dollar market cap you are going to have a lot of people casting an eye over you,” Mr Barnaba said.

Zinifex’s hostile $775 million bid for Allegiance Mining this week marked the first move by the zinc miner into the nickel sphere, while Sinosteel Corp is vying to become the first Chinese company to launch a takeover bid for an Australian miner, having proposed a $1.2 billion bid for iron ore aspirant Midwest Corp.

PETER KLINGER

sorry if this has already been posted. cheers notthemama
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