borehams comments from the strine

From Friday's "Criterion" column in "The Australian":

LIKE a butterfly flapping its wings in the Amazon, serial predator Xstrata's tilt at Indophil Resources has flow-on consequences for other listed entities, notably emerging nickel producer Albidon.

Xstrata's $1-a-share cash bid values Indophil -- 34 per cent owner of the monster Tampakan copper mine in the southern Philippines -- at $430 million.

In March, Indophil itself lobbed a $315 million-plus scrip offer for its 25 per cent shareholder Lion Selection to widen its one-mine repertoire and control its own destiny.

Indophil yesterday rejected Xstrata's bid as "an attempt to frustrate" Indophil's Lion takeover. "It clearly demonstrates that Lion has no real alternative strategy for its business other than to sell assets," Indophil said.

As if to prove the point, Lion yesterday announced it had sold its 30 per cent stake in the Cracow gold mine to Beadell Resources for $80 million. Newcrest, which held the remaining 70 per cent, last month sold its stake to Beadell for $200 million.

The sale runs against expectations that Lion would use its pre-emptive right to buy 100 per cent of Cracow, as the first move in its stated strategy of moving from a mining investor to a mining company. But the value implied by the sale of Newcrest's stake prompted a change of heart. The sale leaves Lion with cash of close to $200 million -- and even more if its biggest asset -- the Indophil stake -- is acquired by Xstrata.

Attention has turned to Lion's 21 per cent stake (direct and indirect) in Albidon, which on Wednesday said it would start operating from its Munali underground mine in Zambia. Management has slated output of 10,500 tonnes per annum from 2010, with expected free cash flow of $150 million a year.

Rumours are rife that Lion will sell, thus sending Albidon in play. Potential buyers include China's Jinchuan group, which as well as having an output agreement with the miner is a 5.6 per cent Albidon holder. The usual suspects -- Norilsk, Zinifex and Xstrata -- are also mentioned.

Lion shares last night remained in a trading halt pending a further announcement, most likely a capital return to lock in holders tempted to sell to Indophil.

Indophil's share price has improved by 46c, or 63 per cent, since it lobbed its offer of 2.5 Lion shares for every one of its own shares on March 19. At the time, this valued Lion shares at $1.65.

At yesterday's close, this value had climbed to $2.70, including yesterday's 30c, 38 per cent spurt after Xstrata lobbed its offer.

Ironically, Lion has improved the bid prospects of its unwanted predator (Indophil) by pledging its 25 per cent Indophil stake to Xstrata. Arguably, Indophil's price will retract if Xstrata's offer fails, but according to Indophil the price strength also reflects a fundamental re-rating of Tampakan's value. Tampakan has obvious attraction as the world's fifth biggest unexploited nickel deposit. The trouble is, it's located where communist rebels cause occasional mayhem. This corporate play must rate as the most convoluted one to emerge this year. Albidon is rated a speculative buy, Indophil a hold and Lion a speculative buy. A strong Bex is also recommended.