Rio Tinto's Palabora Sell-Off Inspires Investors Worldwide!
Rio Tinto's unexpected sale of its asset Palabora Mining Co. (South Africa) seems having fired investor fantasies in Bougainville Copper Limited (BCL). BCL shares soared 10 percent today in Sydney and even 17 percent in Francfurt at 11am local time. Bougainville Copper's fair value is AUD 30 to AUD 40 per share once the Panguna mine is re-opened.
Palabora is producing 80,000 metric tonnes of copper. BCL will produce 510.25 M pounds of copper or 232,000 metric tonnes of copper plus 631,000 ounces of gold worth some USD1.2 billion, silver plus molybdenum. Palabora has a known mile life of 5 years; BCL has 14 years. Palabora is worth USD700 million. BCL is worth some USD400 million.
In so far Bougainville Copper Limitied is actually an extremely undervalued, solid and promising investment !
Rio, Anglo Aim to Sell $700 Million Holding in Copper Producer Palabora By Jesse Riseborough and Jana Marais
Sep 5, 2011 Rio Tinto Group and Anglo American Plc (AAL), which together own about three-quarters of Palabora Mining Co., said they plan to sell their entire holdings in the South African miner as it no longer fits their investment objectives.
Palabora?s main asset, a mine that produces copper and magnetite, ?is no longer of a sufficient scale? for either Rio or Anglo, and a sale process for their stakes has started, the companies said today. Rio holds about 58 percent of Palabora and London-based Anglo almost 17 percent. Their combined holding is valued at about $700 million based on the closing price of Palabora stock in Johannesburg trading today.
The Palabora operation accounted for 8 percent of Rio?s mined copper output in the first half of this year, according to Liberum Capital Ltd. The Phalaborwa, Limpopo province-based company is South Africa?s only producer of refined copper, with output of about 80,000 metric tons annually.
Mining is scheduled to end at Palabora?s operation in early 2016, while a study to extend the mine?s life to 2030 is under way, Rio said. The company, which has been an investor since Palabora Mining was incorporated in 1956, declined to estimate the cost of prolonging the production period, in an e-mailed response to queries.
?Rio Tinto is no longer the natural owner of Palabora due to the limited opportunity to significantly expand copper mining,? Andrew Harding, chief executive officer of Rio?s copper unit, said in a statement.
?Solid Future? ?We believe Palabora has a solid future under an owner who can develop the magnetite business alongside the existing copper and vermiculite operations,? Harding said.
Palabora Mining?s copper smelter would need investment to ensure it complies with emissions legislation due in 2016. Rio declined to estimate the cost of this, in its e-mailed response to questions.
Palabora has advanced 44 percent in the last 12 months, giving it a market value of 6.74 billion rand ($945 million.) The stock declined 2.3 percent to close at 139.51 rand today. The balance of is shares are held by private investors.
Rio Tinto, the world?s second-largest mining company, fell 5.1 percent to 3,488.5 pence at the close of London trading today. Anglo American dropped 3.6 percent to 2,368.5 pence.
To contact the reporters on this story: Jesse Riseborough in London at [email protected]; Jana Marais in Johannesburg at [email protected]
To contact the editor responsible for this story: John Viljoen at [email protected] .
BOC Price at posting:
96.5¢ Sentiment: ST Buy Disclosure: Held
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