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Xstrata bid to leave Nkomati intact Posted: Mon, 26 Mar 2007 [miningmx.com] -- XSTRATA’s C$4.6bn bid for LionOre Mining International was unlikely to disturb the expansion of Nkomati Nickel, a mine in South Africa jointly owned by LionOre Mining and African Rainbow Minerals (ARM), a JSE-listed empowerment firm. Xstrata announced it would make an all-cash, C$4.6bn bid for the shares of LionOre Mining. The offer is equal to a 5.8% premium to LionOre Mining’s Toronto Stock Exchange close on March 23 of C$17.49/share. The offer has the support of LionOre’s board. “Xstrata has made this bid for LionOre because of the company’s growth profile,” said Peter Breese, MD of LionOre Mining. “But the exact details of each project have not yet been negotiated.” A feasibility study proposing to take Nkomati Nickel to 20,000 tonnes/year of nickel from 5,000 tonnes/year is due in June or July. In an earlier iteration of the project, 16,500 tonnes/year was planned from the mine at a cost of about R2bn. In 2005, Nkomati produced 5,291 tonnes of nickel as well as 3,260 tonnes of copper and 97 tonnes of cobalt. The by-products make it one of the lowest cost nickel producers in the world. Andre Wilkens, CEO of ARM, said the Nkomati Nickel project may be accelerated if Xstrata became its owner. “Xstrata have a larger balance sheet and want to grow quicker. It will be nice to see what their input will be,” he said. He also acknowledged that were Xstrata to successfully bid for LionOre, it would throw ARM closer to the UK firm. “This transaction will strengthen our relationship with Xstrata. For them to buy LionOre demonstrate’s Xstrata’s confidence in South Africa and Africa as a whole,” Wilkens said. In February last year, ARM bought a 29% stake in Xstrata’s South African coal business for R2.4bn, including control of the R2.3bn Goedgevonden coal project. Interestingly, the two companies also informally agreed to explore mining opportunities in Africa. “We hope to grow with them,” said Wilkens. “It’s too early to say how this will work out.” Xstrata’s bid for LionOre has the irrevocable support of 19% of LionOre’s shareholders. However, acceptances of not less than 66.6% of LionOre shares are required for the bid to succeed. Takeover documents will be mailed to LionOre shareholders on April 6, Xstrata said in an announcement to the London Stock Exchange. Click
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