Allegiance drill results to fend off Zinifex bidTAKEOVER target...

Allegiance drill results to fend off Zinifex bid

TAKEOVER target Allegiance Mining is poised to release this week what are expected to be encouraging exploration drill results on ground around its Avebury nickel mine on Tasmania's remote west coast.

The exploration potential around Avebury will form a major part of Allegiance's effort to fend off a $775 million takeover bid from zinc major Zinifex.

While Allegiance has yet to make an official recommendation on Zinifex's offer, it has previously told shareholders that its preliminary view "is that that value placed on Allegiance doesn't appropriately take into account the future potential of the Avebury nickel province".

And it is understood that the board has been encouraged by preliminary telephone polling of shareholders before Christmas indicating that they were supportive of the company in the face of Zinifex's bid.

Zinifex's bid has been pitched at up to a 41 per cent premium to Allegiance's then share price.

Allegiance has a large retail shareholder base with the board holding 6 per cent and Chinese nickel giant Jinchuan 10.4 per cent. Yesterday Allegiance said it would spend up to $3 million over the next three months to explore the more remote areas of its tenements around Avebury, targeting not just nickel but also copper and tungsten.

Taking advantage of milder summer weather, Allegiance will fly drill teams into remote areas by helicopter. And Allegiance chairman Tony Howland-Rose took the opportunity to take a swipe at Zinifex, which is new to nickel, noting that one of the most attractive drill targets, named Godkin, had been dumped by Zinifex in August.

"When Zinifex relinquished title over the area in August, Allegiance moved very quickly to acquire the area. I think Allegiance knows the west coast and we know nickel," he said.

Zinifex has offered 90c a share, rising to $1.00 a share if the board recommends the deal or it acquires more than 30 per cent of the target. But so far Allegiance has held only a small premium to the $1.00 price, ending yesterday at $1.045.

While Jinchuan is speculated to be a possible counter bidder, it would take a change in strategy since it has been content for now with its 10 per cent stake and a sales agreement for all of Avebury's production. Nevertheless, Jinchuan's $244 million bid this week for a Canadian explorer may be a signal that it is prepared to build its own mining business in Australia.



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http://www.theaustralian.news.com.au/story/0,25197,23025141-5005200,00.html