takeover target - time to buy now

From the Metal Detective.

http://www.miningnewspremium.net/

Botswana takeover punt

IS BOTSWANA’S Kalahari copper belt about to become the next hot spot for African takeover activity? With big names like Blackrock, OZ Minerals and Xstrata being thrown into the mix, some punters believe so. The Metal Detective by Stephen Bell


Despite Europe’s ongoing debt woes and wobbly base metal prices, there are few signs yet that interest in African copper assets has abated.

Already this year we’ve seen the $US1.4 billion takeover of Metorex by China’s Jinchuan and the proposed $C1.3 billion takeover of Anvil Mining by Minmetals Resources, both in the Democratic Republic of Congo.

The deals followed Barrick Gold’s bold overbidding of Minmetals in May to take over Zambian copper miner Equinox Minerals at a cost of $C7.3 billion.

Some might argue Barrick paid top dollar, given copper prices have retreated roughly 15% since it sealed the deal.

The other worrying sign for African copper bulls is the revival of sovereign risk concerns after Anvil’s joint venture partner, state-owned Gecamines, recently threw a spanner in the works of the Minmetals takeover.

Enter Botswana, rated by the annual Fraser Institute survey as the safest mining destination in Africa and renowned for its diamond output.

As one Botswana aficionado put it: “It is Africa for beginners – they don’t pinch a project off you when you go into production”.

Up until recently, Botswana didn’t attract much copper interest as the country’s host rocks – similar to the well-known geology of the Zambian and DRC copper belts – are mostly covered by the Kalahari sands.

But the situation is rapidly changing with the emergence of Brisbane-based Discovery Metals, which is due to commission its $US175 million Boseto development in the first half of next year.

And as Discovery edges closer to production, the predators are hovering.

A few months ago, Discovery was touted in a national newspaper as a takeover target for Terry Burgess’ OZ Minerals.

The takeover drum started beating louder a week ago when London-based funds manager Blackrock confirmed it had spent $65.8 million building a 12% stake in Discovery – most of it acquired on October 31 from Macquarie Bank.

It means Blackrock – one of the world’s biggest mining investors with $US36 billion in natural resources funds under management – has dealt itself into the Kalahari copper game.

And the game is likely to involve takeovers – Blackrock recently said it expected the massive industry consolidation in mining to continue, driven by low valuations of companies.

In terms of the Kalahari, Discovery, valued at $570 million, appeals as the main target because of its nearly completed processing plant and 10,000sq.km of plum ground holdings.

The other key players are Perth-based MOD Resources – Miles Kennedy’s new exploration venture that has more than 8000sq.km located adjacent to Discovery – and Canada-listed Hana Mining’s Ghanzi deposits.

MOD published its maiden assays from an $8 million drilling program last month, revealing a “high-grade” zone of copper and silver mineralisation.

The discovery adjoins the Gaia copper anomaly, which Discovery identified as a target for a new stand-alone open pit copper-silver mine on its adjoining lease.

The existence of four separate ventures (Hana last year spun off an exploration subsidiary, New Hana Copper Mining) has prompted talk a large corporate might swoop and consolidate the entire region into one big copper play, with Boseto the first stage.

“In our view, the Botswana region is well positioned for consolidation, particularly given [Discovery’s] near-term production profile,” Foster Stockbroking said in a recent note.

Minmetals, headed up by Andrew Michelmore, is already bidding for Anvil in the DRC and has made it known it remains keen on further African copper investments.

But it is not only the Chinese sniffing around.

The Metal Detective understands New Hana Copper recently hosted UK-based Xstrata and an unnamed Chinese entity on a site visit to its Botswana leases.

Discovery shares, meanwhile, have come off the boil in recent days after the glow created from Blackrock’s investment faded.

But there is talk corporate action might eventuate early next year, as long as Europe doesn’t suck us all into another prolonged crisis.

For MOD chairman Miles Kennedy, Botswana is his latest “nearology” play.

The former Sandfire Resources chairman tried it with some success in WA where his explorer Resource & Investment recently unveiled a gold discovery on its Doolgunna project, just 3km from Sandfire’s DeGrussa.

Now Kennedy is trying his luck in southern Africa, where the stakes could be even larger if the global copper hunters really are circling.