so many contenders to buy bci

as well as minmetals the last paragraph mentions regent are poised for acquisitions i wonder where the writer got that info!



MINMETALS Resources' $1.3 billion takeover of African copper producer Anvil Mining has not sated the Hong Kong-listed company's hunger for acquisitions.

Minmetals chief financial officer and executive director David Lamont, in Hong Kong last Friday to shepherd through an extraordinary general meeting of the company, told The Australian the company had by no means finished with its planned acquisitions.

Minmetals is still in the process of wrapping up its bid for Anvil, with the offer posted to shareholders earlier this month and not due to close until November 24.

The Anvil offer follows Minmetals' bid for Zambian copper play Equinox Resources earlier this year, which was trumped by a higher offer from Barrick Gold.

It's looking increasingly unlikely that there will be any such repeat of a higher bidder, with 40 per cent of Anvil shares subject to a lock-up agreement with Minmetals.


Lamont says the Anvil takeover is only the first step in a process aimed at dramatically growing the size of Minmetals, which was formed out of China's purchase of the bulk of the assets within Australian-listed OZ Minerals during the global financial crisis.

"Our ambition is to be one of the top mid-tier mining companies, which means we have to have a market cap in the order of $20bn. That means we need to grow something like three to five times," he says.

Minmetals would appear to have limited growth options within its existing portfolio, with only the Dugald River zinc project in Queensland standing out as a significant new development. That project will effectively replace the company's aged Century mine.

That leaves acquisitions as the key method of delivering the group's targeted growth.

Lamont says the acquisition of Anvil and its assets in the Democratic Republic of Congo will increase the group's copper exposure to about 43-44 per cent of its product mix and reduce zinc to 40-41 per cent.

A third significant commodity exposure is needed to provide balance to the portfolio, Lamont says, with the focus on securing nickel, bauxite and alumina.

Minmetals already has nickel within its portfolio in the form of the mothballed Avebury mine in Tasmania, but the project has been up for sale for a number of months.

Lamont says Avebury is of insufficient scale to fit the Minmetals model. But, judging by Lamont's comments, the weak market for nickel at the moment suggests Avebury may have to stay in Minmetals for a while.

"It is fair to say the current market, especially the nickel market, has proven to be tough (but) we still have more than one party that we're talking to," he says.

While the sales process drags on, Minmetals is exploring around the project to see if it can find additional resources to support an expanded operation. "I would expect by the end of 2011 we will have cemented our position as to whether a sale is the best course of action, whether we keep the operation in a mothballed state or whether we recommence," he says.

Minmetals' aggressive acquisition strategy is aided by its access to cheap funding from China.

The company has just collected more than $700 million from the sale of its upstream processing assets to its parent company, state-owned China Minmetals. That means the Anvil buy will add about $600m to Minmetals' debt position, with Lamont indicating the debt will attract an interest rate of just over 2 per cent a year.

That access to cheap debt gives Minmetals an added advantage when it comes to acquiring assets in Africa, with the company unburdened by having to pay higher interest rates that Western companies would have when doing business in high-risk countries such as the DRC.

"That's one of the advantages of moving into the DRC, because we are able to finance transactions leveraging relationships with the Chinese banks, and not have to pay a risk premium via debt for a country such as the DRC," Lamont says, adding that Minmetals is looking for more assets in that part of the world.

"DRC and the Zambian copper belt are world class and we'd like to have further exposure to that. We would certainly see that as a very undeveloped, good-potential part of the world."

South America is another region on the horizon.

Should Minmetals want any corporate advice on its acquisition strategy, it has a new group in Hong Kong it can call on. Perth-based boutique resource advisory firm Argonaut Securities has just opened its Hong Kong office, joining Macquarie Bank and fellow boutiques BGF Equities and Helmsec as Australian groups with a presence in the city.

Argonaut managing director Eddie Rigg and chairman Charles Fear, in Hong Kong for the formal opening of the office, say that the expansion has been in the works for a number of years.

The recruitment of Perth boy Travis Smithson from JPMorgan's Hong Kong office to head the new branch is the final piece needed.

"We've been trawling this part of the Asian market for over three years and it became clear to us this was where the flow of capital for resource projects that had a link into China was going to come from," Fear says. "We then thought it would make a lot of sense to us that, instead of flying in and out like a lot of the big investment banks did, we would establish an office up here."

Much of the office's bread and butter will be introducing junior resources companies from Australia and elsewhere to the Hong Kong capital market.

Fear says that, of recent capital raisings carried out by Argonaut, about 25-35 per cent of the funds has been raised in Hong Kong.

Argonaut has also secured a licence that allows it to take on advisory roles, with Rigg eager to see the group help out some of the cashed-up Hong Kong-listed miners looking for acquisitions.

On top of Minmetals, G Resources, CST Mining, Apac Resources and Regent Pacific are all in a position to make acquisitions out of Hong Kong in the near term.