barry fitzgerald article

not holding IRN (used to), one day this will be a monster...good luck to holders

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Indophil

GOOD on Indophil Resources (IRN) for serving up a takeover bid for its 25.7% shareholder, Lion Selection (LST).

As analyst Chris Brown at ABN Amro Morgans observed, it is a case of the grossly undervalued (Indophil) bidding for the undervalued (Lion).

"I hope you own one or both of them, but I have no idea which one will perform better from here," Brown said in a note to clients last week. He was right.

Garimpeiro's interest is in the grossly undervalued Indophil. It closed at 61¢ a share last Thursday, giving it $230 million market capitalisation.

That's for a company holding $100 million cash and with a 37.5% stake in Tampakan, one of the world's biggest undeveloped copper/gold deposits. At last count, Indophil's share of the undeveloped $US115 billion ($A127.5 billion) resource - yep, that's right - was $US43 billion.

The Tampakan interest is at the heart of Indophil's hostile bid for Lion. Fearing that Lion could look to cash in its Indophil stake to fund its own ambition to switch from resources investor to miner, Indophil has set out to ensure it remains hitched to Tampakan, a joint venture with Xstrata. The prize of a Tampakan development is too big to let go.

Ever acquisitive Xstrata is working at having Tampakan in production by 2012 and if the Lion stake in Indophil were to shake loose, it would be sure to pounce. But should Indophil's bid for Lion succeed, Lion's shareholding in Indophil would be cancelled, allowing Indophil to slam the back door on a low-ball bid from Xstrata.

Just as important would be the additional $105 million that the Lion acquisition would tip into Indophil's coffers. Xstrata will be setting a cracking pace in the multibillion-dollar development of Tampakan, and Indophil will need to keep pace.