Allegiance looks to Jinchuan to ward off Zinifex's bidFont Size: Decrease Increase Print Page: Print Andrew Trounson | January 08, 2008 ALLEGIANCE Mining chairman Tony Howland-Rose and his board will be encouraged by yesterday's news that Chinese major shareholder Jinchuan is on the hunt for mining assets.
Zinifex CEO Andrew Michelmore, left talks with shareholders after the company's AGM in Melbourne. Picture: Richard Cisar-wright But whether the Chinese are shaping as a counter-bidder to Melbourne-based Zinifex is another question, given that they already have an off-take deal for production from Allegiance's Tasmania Avebury nickel mine.
Jinchuan, China's largest nickel producer, holds 10.4 per cent of Allegiance, but can't block Zinifex's $775 million takeover, which is unconditional.
But it could counter-bid, just as it has in Canada with a $244 million bid for explorer Tyler Resources.
Jinchuan has come in over the top of an unsolicited bid for Tyler from Mercator Minerals, bidding a 54 per cent premium to Mercator's offer. That is a 116 per cent premium to the level at which Tyler shares were trading before Mercator's bid. The attraction is Tyler's Bahuerachi prospect in Mexico, which is billed as the country's largest undeveloped copper-zinc project.
But the problem for Mr Howland-Rose in encouraging Jinchuan to bid against Zinifex is that the Chinese company already has what it presumably wants: access to Avebury's nickel production.
New Zinifex boss Andrew Michelmore has made a point of talking up his long relationship with Jinchuan, which he cultivated when he headed WMC, making clear that the marketing deal with Jinchuan would stay in place if Zinifex won control.
The Jinchuan talk didn't impress the market yesterday.
Allegiance shares fell 1c to $1.03, a small premium to Zinifex's offer.
Zinifex has offered 90c a share, rising to $1 a share if it wins board backing for its bid or secures more than 30 per cent of the target.
Allegiance has told shareholders to take no action while it considers Zinifex's bid. With Zinifex's offer documents now in the mail, Allegiance is expected to decide on a recommendation by late next week.
Allegiance is being advised by Merrill Lynch, which is scouting for counter-offers.
The Avebury mine is due to come into production in the first quarter at an annual rate of 8500 tonnes of nickel a year.
Based on exploration potential in the area, Avebury has preliminary plans to expand the capacity of the processing plant by up to two-thirds.
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AGM Price at posting:
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