pan aust: a possible minmetals takeover target

Once EQN takeover is complete, most likely a lot of EQN holders will put their money in PNA.

Report indicates that a group of Chinese companies lead by Jinchuan Group and China Investment Corp are in talks leading to a possible bid for Lundin Mining Corp (TSX: LUN). This leaves Lundin out of Minmetal Resources reach, as Chinese regulators never allow two of the same Chinese SOEs to go for one target. eg. rumour was China?s Yanzhou Coal (owner of Felix Resources) and Shenhua Energy Group are both eyeing on acquiring WHC, but the NDRC only allows one of the companies to bid for WHC. So in our case, if a Jinchuan/CIC bids for Lundin Mining, Minmetals cannot compete against that bid.

OZL is clearly not a MMR target, thus PNA is likely in the box seat, also MMR has operations in Laos, there is more synergies. Given PNA's assets are overseas, FIRB is a likely go ahead (as FIRB gave the go ahead for MMR's target for EQN). GRAM holding 20% may accept a good MMR premium.

Below are some articles.

--------------------------------------------------
Minmetals short on targets after Equinox failure

Published 3:26 PM, 27 Apr 2011
Last update 3:52 PM, 27 Apr 2011
Reuters

HONG KONG - China's Minmetals Resources faces a challenge finding a target worth paying for after the state-backed company was trumped in its effort to buy copper miner Equinox Minerals, analysts and bankers say.

Minmetals on Tuesday withdrew its bid for Equinox after Barrick Gold Corp, the world's largest gold miner, topped it with a $C7.3 billion ($A7.1 billion) bid.

While executives can later earn credit for not overpaying for a deal, the current target list for Minmetals' expansion plans looks thin, potentially constraining its growth.

"It is pretty hard to identify opportunities in the US copper scene. There have been some big deals done over there recently, a lot of consolidation," one source close to the process said, adding that there were limited opportunities in Australia as well.

Minmetals is a unit of state-run China Minmetals Corp, which has previously failed in its attempts at buying a Canadian mining assets. In 2004, the Canadian government blocked China Minmetals efforts to buy Noranda, a copper mining company.

But the latest failure will not stand in the way of Minmetals' ambition of turning itself into a global miner by growing its upstream base metals business.

"Minmetals is looking at overseas acquisitions with focus on copper mines, as the metal is still in short supply," UOB Kay Hian analyst said.

"The targets are likely to be located in countries such as Mongolia, Canada, South America and Africa."

Being a state-backed company, Minmetals will have access to sufficient funds to pursue large transactions, she added.

Possible targets

Analysts named PanAust, Canadian-based miners Ivanhoe Mines and First Quantum and even the combination of Barrick and Equinox as potential targets for Minmetals.

But some of these companies are huge compared with Minmetals' own size and also have miner rivals as large shareholders, as with the case of Rio Tinto Ltd's 42 per cent stake in Ivanhoe. Chinese investment group Guangdong Rising Assets Management has a 19.9 per cent stake in PanAust.

Minmetals currently operates copper, zinc, lead, silver and gold mines largely in Australia and some in North America. According to a company presentation, by fiscal 2015, about 63 per cent of the company's business would consist of zinc, 25 per cent copper and 6 per cent lead.

Another analyst said Minmetals could eye the combination of Barrick and Equinox.

"This may either put Barrick on the Minmetals menu or may help to form a co-operative joint venture between Barrick and its Chinese rival," London-based Fairfax said in a note.

Shares in Minmetals rose more than 5 per cent on Wednesday, partially recovering from the double-digit drubbing they suffered the day before. Its shares plunged as much as 13 per cent after it said it would not pursue its $6.6 billion Equinox bid.

Minmetals shares hit an early high of $HK5.47 and were up 3.9 per cent at HK$5.39 by 1422 AEST.

One analyst who did not want to be identified said that there are very few miners in the $US5 billion-$US15 billion range compared to the number of small, early-stage and often single-project producers, and, at the other end of the spectrum, the "big boys."

http://www.businessspectator.com.au/bs.nsf/Article/UPDATE-1-After-Equinox-failure-Minmetals-target-li-GB6M7?OpenDocument&src=srch


Equinox move unlikely to affect smaller Australian copper producers

Sarah-Jane Tasker
From: The Australian
April 29, 2011 12:00AM

BARRICK Gold's surprise $C7.3 billion ($7.1bn) friendly move on copper miner Equinox Minerals is unlikely to put Australian rivals in play because the remaining available stocks lack corporate appeal, according to a leading analyst.

Credit Suisse resources analyst Michael Slifirski said the main positive for local miners PanAust and OZ Minerals was the potential for Australian shareholders to shift their interests to those stocks.

"Australian shareholders of Equinox will lose their chosen copper exposure but will have cash to redeploy. The obvious homes are PanAust or OZ Minerals," he said.

But, he said, there was little "read-through" for PanAust and OZ as the remaining pure copper producers in Australia.

"Neither offers the corporate appeal of Equinox from a scale or mine life perspective," he said.

"We do see some interesting read-through for Newcrest. Newcrest, Goldcorp, Newmont and Barrick will all derive a similar proportion of revenues from copper and gold production, making comparison and relative valuation more straightforward."

Barrick's offer of $C8.15 a share, trumping an earlier bid by China's Minmetals Resources, has been backed by the Equinox board.

Equinox shares in Toronto fell 0.25 per cent to $C8.09 yesterday. Investors see a competing bid as unlikely.

Mr Slifirski said he would be surprised to see a competing offer from a goldminer and could not envision a copper company being able to match or better the offer.

"Barrick's offer confirms the strategic appeal of long-life assets, particularly as a potentially core long-term generator of earnings and cashflow," he said.

Barrick Gold on Wednesday reported a 22 per cent rise in first-quarter earnings on the back of strong gold and copper prices. But investors remain cautious about the bold move into copper, with concerns about a change in strategy for the gold giant.

Its stock has fallen 10 per cent since the deal was announced.

Barrick founder and chairman Peter Munk said the company remained committed to gold.

http://www.theaustralian.com.au/business/equinox-move-unlikely-to-affect-smaller-australian-copper-producers/story-e6frg8zx-1226046543324