Zinifex link-up points to Gwalia bid By Barry Fitzgerald October 11, 2005 Page Tools
www.theage.com.au
CASH-RICH Zinifex has formed a strategic tantalum alliance with Haddington and Mitsubishi as a precursor to it making a possible $400 million-plus offer for the world-class tantalum business housed within the collapsed gold/tantalum producer Sons of Gwalia.
Because it could be some time before a float or trade sale decision is made by the administrator of SOG on the tantalum business, the initial focus of the Zinifex/Haddington/Mitsubishi (ZHM) alliance will be to explore for new deposits of the high-tech material, which currently sells for $US100,000 ($A132,000) a tonne in its finished form.
But with the SOG operations in Western Australia accounting for about 60 per cent of the global tantalum market, the main game for the alliance is to position itself in the bidder queue should SOG's administrator opt for a trade sale of the business in preference to a float.
Announcing the creation of the exploration alliance, Zinifex said it would also "seek opportunities to acquire tantalum mining and marketing businesses". AdvertisementAdvertisement
ASX-listed Haddington is a tantalum concentrate producer that until recently was a supplier to SOG. It brings the exploration properties into the alliance, and industry contacts.
Mitsubishi is a global trader of commodities and, along with Zinifex, will bring balance sheet strength to any offer for the SOG business.
Zinifex, itself created from the collapse of Pasminco, is making money hand over fist thanks to the surge in zinc metal prices.
Macquarie Equities recently estimated that between this year and 2010, Zinifex could generate about $2 billion in free cash.
That sort of earnings power means the group could comfortably fund a $1 billion-plus acquisition.
Apart from giving it something to do with its cash, a successful offer for SOG's tantalum business would provide a quick fix to Zinifex's main legacy issue — the relatively short life of its main asset, the Century zinc mine in Queensland.
Zinifex chief executive Greig Gailey said yesterday that the ZHM alliance was in keeping with the group's "strategy to grow its mining business, both in our traditional base metals and in selected niche minerals.
"We aim to occupy niche markets that offer superior returns and with lasting competitive advantage. We believe that opportunities in the tantalum industry meet these criteria," Mr Gailey said.
Tantalum is a high-value material used in capacitors and high-performance alloys. Zinifex shares
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