Mining & IndustrialBHP tipped as rival bidder for LionOre 2nd...

Mining & Industrial


BHP tipped as rival bidder for LionOre

2nd April 2007, 8:00 WST


BHP Billiton could emerge as a rival bidder for LionOre after the Canadian nickel miner revealed Xstrata’s “lock-up” of 19.5 per cent of shares as part of its $US4 billion ($5 billion) friendly offer would evaporate if a higher bid were lodged.



In revealing details of the lockup agreements with LionOre’s directors, management and key shareholders which analysts had previously thought would prove a deterrent to a higher offer, Lion-Ore noted the agreements could be revoked in the case of a “superior proposal”.

LionOre would be allowed to hold discussions with a rival bidder for a week and would even be able to provide extra due diligence documents if it received an unsolicited proposal. Xstrata would then be given five days to match or exceed the rival offer.

Otherwise, the lock-up agreement would evaporate, although any rival bidder would be forced to pay a $C131.4 million ($141 million) break fee to Xstrata if its friendly deal with LionOre fell through.

But RBC Capital Markets said the numbers suggested there was room for a higher bid, given Xstrata did not appear to be paying “anything” for its cost savings or LionOre’s Activox nickel processing technology.

Sources have suggested that BHP Billiton might be interested in LionOre because its one million-tonne Honeymoon Well project is close to BHP Billiton’s Mt Keith nickel operations in WA.

Additionally, the Activox hydrometallurgical process might be useful at the Mt Keith deposit.

There have been news agency reports that rumours of BHP Billiton’s potential involvement were rampant among delegates at a major nickel industry conference in New Caledonia last week.

And Canada’s Globe and Mail reported CIBC World Markets analyst Cliff Hale Saunders told clients: “BHP is the only other logical bidder for LionOre for strategic reasons.”

Xstrata last week declined to reveal the amount of cost savings it expected to gain from purchasing LionOre for “competitive reasons”.

A BHP Billiton offer for Lion-Ore would mean the miners would go head-to-head in a public bidding war for the first time since their fight for Australian nickel, copper and uranium miner WMC Resources in 2005.

LionOre, which has a secondary listing in Australia that is scheduled to be removed in June, closed 5¢ higher at $20.35 on Friday.

Meanwhile, LionOre confirmed it had already appointed advisers to sell its Thunderbox gold mine in WA, which produced 155,000 ounces last year at a $US352 an ounce cash cost, for a $1.8 million profit.

The mine is scheduled to close in the third quarter but it still has about 450,000 ounces of resources and exploration potential remaining, with no more hedging contracts.

Xstrata chief Mick Davis has said his company is not interested in gold mining, suggesting it too might sell Thunderbox.

JAMIE FREED

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