Allegiance unsure of Jinchuan in Zinifex fightarticle The Aust...

Allegiance unsure of Jinchuan in Zinifex fight

article The Aust Business
Nigel Wilson, Energy writer | January 18, 2008

ALLEGIANCE chairman Tony Howland-Rose has declined to predict whether his company's major shareholder, the Chinese Jinchuan Nickel Group, will reject a higher offer for the Tasmanian nickel miner from Zinifex.

Commenting after Allegiance yesterday released its target statement, rejecting Zinifex's $745 million, 90c-a-share offer, Mr Howland-Rose said the Chinese were "a right bunch of cookies" whom he would not second-guess.

Jinchuan has contracted to buy all its nickel output, which is scheduled to begin late this quarter, ramping up to an initial 850,000 tonnes a year.

The Allegiance board, which is busy courting other possible bidders, claims to have the support of 6.4 per cent of the capital in rejecting the Zinifex offer.

The Allegiance chairman said the company was planning to lift Avebury's capacity to 1.5 million tonnes, all of which would be taken by Jinchuan.

Avebury has a resource estimated at 4 million tonnes grading 1.5 per cent nickel.

Zinifex later hit back at Mr Howland-Rose's claim that the bid undervalued the company, and was "opportunistic" and "inadequate". Zinifex CEO Andrew Michelmore said Mr Howland-Rose was offering "nothing more than blue sky promises and treasure chest hyperbole".

Allegiance's target statement noted that Jinchuan saw significant further upside in Allegiance and therefore the Zinifex offer did not reflect the true value of the company.

Mr Howland-Rose also rejected Zinifex's criticism that the target statement did not include an independent expert's report on the value of its holdings, saying the Allegiance team were the experts in the Avebury deposit.

"It is important to realise that the Allegiance team are the experts. This is a completely new nickel province," he said, revealing that Canadian nickel group Falconbridge (now owned by Xstrata) had failed to stump up $5 million for a 50 per cent stake in Avebury some years ago. "That was the best decision we did not get," he said.

There are four pillars to Allegiance's rejection of the Zinifex offer: that it is just coming into production; that around 90 per cent of the permits around Avebury remain to be explored; that the Allegiance team that had put together the development are also shareholders; and that Jinchuan was a tremendous partner.

Later Zinifex declared its offer unconditional after the Foreign Investment Review Board raised no objection.

Zinifex told the exchange its voting power in Allegiance was 0.01 per cent. Allegiance shares closed last night 1c higher at $1.065.