Nickel miner Albidon seeks to protect itself from possible takeover bids Albidon is looking for new acquisitions in Africa to insulate itself from big miners that may be after its promising nickel properties and to add value to its shareholders.
Author: Rodrick Mukumbira Posted: Monday , 12 May 2008
WINDHOEK -
Vultures are reportedly circling Albidon Ltd., days before it brings its Munali nickel project in Zambia on stream, such that it has decided to try to insulate itself through acquisitions in Africa.
First ore from the underground Munali sulphide mine is due to start production anytime this week, producing up to 10,500 tons a year of contained nickel - a small figure, but one that is likely to get big metal producers drooling at another opportunity to satisfy China's consumption binge.
Signs of desperation to save itself from possible bidders emerged in April when the Perth-based company hired the Royal Bank of Canada as a corporate adviser to help it study potential overseas opportunities.
It said it believed the financial institution could "greatly" assist it with the implementation of pursuing an "aggressive" growth and development strategy. Royal Bank "will assess potential corporate opportunities and progress its ongoing growth strategy," Albidon announced in a statement sent to the Australian Stock Exchange.
According to The Age's report last week, the Royal Bank's Sydney desk had, days before the engagement, revised Albidon's price target to A$4.50 per share - a fair value to shareholders if a bid was made.
Nevertheless, big miners such as global nickel producer the acquisitive Anglo-Swiss group Xstrata, Perth-based Zinifex and Russia's Norilsk are currently on a prowling spree, characterised by a flurry of mergers and acquisitions the two companies have signed so far that have sent waves of nervousness through the ranks of smaller producers.
Of recent note, Xstrata has paid US$3.1 billion for a 100% stake in Jubilee and Zinifex, Albidon's joint venture partner in a lead and zinc exploration project in Tunisia, is in the process of swallowing Allegiance in a deal worth US$950 million.
According to a Dow Jones Newswire report on Saturday, the two nickel mining giants are currently rumoured to be looking at Albidon "as a potential US$700 million-plus addition to their expanding nickel units".
"Everybody at the moment is predator and prey," Dow Jones quotes Albidon's managing director Dale Rogers as saying in a weekend report confirming the search for new opportunities to insulate the company.
"We're at a critical stage for the company -- we're just about to receive cash flow," he added, referring to the near-producer Munali.
Albidon's vulnerability may well be coming from inside, from some of its major shareholders. The presence of Melbourne-based Lion Selection Group in its shareholding has sparked speculation that it may soon find itself fighting a takeover bid. Lion indirectly owns a 5.7% stake in Albidon, reportedly worth about US$36 million, and its part-owned African funds hold about 21% of the group.
The next biggest shareholder is Chinese nickel group Jinchuan, which owns a 5.6% stake. It has also signed an offtake agreement for Albidon's Munali production.
For the Lion Group, disposing of its stake in Albidon could become handy for its bank balance. Lion has until June this year to pre-empt the US$200 million that Beadell Resources has offered for Newcrest's 70% stake in the Cracow goldmine in north Queensland.
Lion owns the remaining 30% of Cracow and has to pre-empt the Beadell offer as it moves forward with its plans to transform from a resource investment group into a mining company, according to The Age's report.
But a Lion spokesman dismissed such a move as being out of question in an interview with Dow Jones. "That's because Lion Selection doesn't have the direct investment in Albidon, it is only a passive investor in African Lion," he was quoted as saying.
Lion also recently sold its shares in Allegiance to Zinifex, a company that is reportedly having a good relationship with Munali's production offtaker Jinchuan through its boss Andrew Michelmore, who has worked with the Chinese company before.
Besides having an offtake agreement with Allegiance's Tasmanian mine, Jinchuan has a 10.4% shareholding in the company and is currently awaiting Chinese government's approval to accept an offer from Zinifex.
Russia's Norilsk may seek to expand its assets in Botswana, where it acquired the Tati nickel project from LionOre last year, by taking over Albidon. Albidon's nickel exploration project is in the same area as the Tati nickel project, and the company keeps on reporting promising nickel sulphides intersections.
Its uranium project in Zambia, a joint venture with African Energy Resources, is currently in the Bankable Feasibility Study stage. It also has exploration joint ventures in Tanzania and Tunisia with BHP Billiton and Zinifex, respectively.
ALB Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
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