RENO, NV - Prudential Equity suggested Wednesday that Swiss...

RENO, NV -

Prudential Equity suggested Wednesday that Swiss miner Xstrata's friendly bid for Vancouver-based LionOre suggests that fellow nickel independent companies FNX Mining and Dynatec are also possible takeover targets.

On Monday, Xstrata announced it would acquire LionOre for $3.9 billion, or just under $1 per pound of contained nickel reserves and resources. In their research, metals analysts John Tumazos, Paretosh Misra and Andrew Tseng questioned "the willingness of LionOre to sell at such a low valuation, which amazes us and benefits Xstrata."

"Either the LionOre directors do not believe in the future viability of the nickel market or they do not like the Botswana location of nearly half of its reserves or they fear development costs surges or operation cost surges or they felt the 1.73 mmt nonreserve ‘resources' were insufficiently documented to command any value," the analysts asserted.

Prudential's analysis theorized that "The disappearance of LionOre as an independent entity eliminates the major other independent nickel option to FNX Mining (TSX: FNX) and Dynatec among takeover operations. Dynatec (TSX: DY) holds a 24/5% interest in FNX Mining--which has two operating mines, the McCreedy West nickel and copper mine, and the Levack nickel operation near Sudbury, Ontario. FNX Mining also plans to develop the nearby Podolsky copper mine for production by 2008.

The analysts estimated Toronto-based FNX Mining's 2010 production to include 100 million pounds of copper, 24 million pounds of nickel and 150,000 ounces of precious metals.

Richmond Hill, Ontario-based Dynatec holds a 40% stake in the Amatovy nickel project in Madagascar, which has 44.1 million tonnes of nickel grade proven reserves and 80.9 million tonnes of nickel probable reserves. Sumitomo Corporation and Korea Resources Corporation (leading a consortium of Daewoo International, Keangnam Enterprises and STX) each will hold a 27.5% interest in Amatovy.

The project's lenders syndicate includes the Japan Bank for International Cooperation, the Export-Import Bank of Korea, Export Development Canada, the European Investment Bank and the African Development Bank. Construction is anticipated to begin in mid-2007. The $2.5 billion Amatovy project is believed to have a 27-year mine life.

Prudential estimates Dynatec's 2012 production to include 50 million pounds of nickel, 4.28 million pounds of cobalt and an additional 5.5 million pounds of nickel, 23 million pound of copper and 34,500 ounces of precious metal owing to its stake in FNX Mining.

Prudential estimated that the world nickel market, including scraps will grow to 2 million to 2.1 million metric tons this year.