Zinifex flexes its M&A muscles in $A775m Allegiance bid Colin...

Zinifex flexes its M&A muscles in $A775m Allegiance bid

Colin Jacoby -MINING NEWS-
Monday, December 17, 2007

MID-TIER zinc play Zinifex has made good on its promise to spend up on mergers and acquisitions, today unleashing a takeover bid for Allegiance Mining worth some $A775 million.

Allegiance investors welcomed the news with the Tasmanian-focused nickel miner's share price soaring 30c (42.3%) to $1.01 in morning trade, while Zinifex slipped 43c (3.1%) to $13.62.

In an announcement this morning, Zinifex said the off-market all-cash offer for Allegiance would be two tiered.

The zinc miner is offering 90c per share for the smaller company, which will upped to $1 per share for all Allegiance shareholders who accept Zinifex's offer, provided it gets more than a 30% interest in the company or the Allegiance board recommends the offer.

Based on Allegiance's shares on issue, the 90c offer values the company at around $628 million, while the $1 offer is worth $775 million.

The 90c offer is a 27% premium to Allegiance's 71c closing price as at December 14, while the $1 offer is a 41% premium.

Allegiance is the owner of the 8500 tonnes per annum Avebury nickel project on the Tasmanian west coast.

The project is expected to treat some 900,000t of ore annually and has a total measured, indicated and inferred resource of 16.3Mt grading at 0.97% nickel for 157,819t of nickel in concentrates.

Production should begin at Avebury by the end of the first quarter next year.

Zinifex's chief executive Andrew Michelmore said the offer was compelling for all stakeholders.

"For Zinifex shareholders, we like nickel as an attractive long term growth business and Allegiance's Avebury project is an excellent entry point for Zinifex," he said.

"With nickel production due to commence in early 2008, this mine would add immediate growth to Zinifex's existing profit centres, the Century and Rosebery mines."

Michelmore – appointed only last month - also said Avebury would be just the start of Zinifex's strategy to grow its copper, nickel and zinc businesses.

"We like investing in high margin, long life, expandable mines and Avebury delivers all these attributes," he said.

"Avebury promises to be an exciting new nickel region that, with appropriate investment, we expect will support rapid production expansion and mine life extension."

The Zinifex bid will be financed from its current cash balance.

The takeover bid comes after acting chief executive Tony Barnes told investors earlier this year that the zinc miner was looking into opportunities to invest the $1.6 billion it raised in the initial public offer of Nyrstar, a zinc smelting and alloying business.

Zinifex currently holds an 8% stake in Nyrstar, which the company intends to maintain for the next 12 months.

Zinifex has also been rumoured to be a takeover target with market watchers tipping copper and gold-focused play Oxiana and Swiss major Xstrata as a would-be suitors.

MiningNews.net was unable to contact an Allegiance representative this morning for comment on the takeover bid.