ENRC bids to buy CAMEC for $950m

Reuters | Thu, 17 Sep 2009 16:46
[miningmx.com] -- Kazakh mining group ENRC may use some of its cash pile to buy junior miner CAMEC for about $950 million and expand into mineral-rich Africa, ENRC said on Wednesday.

The move by ENRC, one of the world's biggest ferrochrome producers, might spark a bidding battle with Chinese parties seeking to lock in supplies of cobalt, analysts said.

ENRC said it was in advanced discussions with AIM-listed Central African Mining and Exploration Co. (CAMEC), which said on July 16 it had been approached about a possible takeover from unnamed parties.

ENRC said in a statement it was considering a cash bid of around 20 pence per share for CAMEC, whose chairman is former England cricketer Phil Edmonds. That would value the firm at about $950 million.

"However, whilst ENRC is engaged in such discussions and is assessing the merits of a potential transaction, there can be no certainty that any such transaction will proceed," it said in a statement, declining to comment further.

CAMEC shares have nearly doubled since it announced the takeover approaches and have soared more than eightfold since the start of the year.

They fell 3.9% to close at 18.75 pence, compared to a 3.2% increase in the UK mining index.

"This bid is definitely lower than I had expected, but does represent a good premium to where the stock has been trading," said Brock Salier, analyst at Ambrian Capital. "A cash bid is certainly attractive in these markets."

Mineral-rich Africa

Buying CAMEC would allow ENRC to expand into mineral rich Africa, where CAMEC has cobalt and coal operations in the Democratic Republic of Congo (DRC), a stake in the Bokia platinum project in Zimbabwe, a bauxite operation in Mali, and a stake in a flourspar operation in South Africa.

CAMEC's flagship mine is the majority owned Mukondo Mountain cobalt operation in the DRC, billed as the world's richest cobalt mine.

Many major mining groups have shied away from investing in the DRC and Zimbabwe until political and economic conditions stabilise, but the two countries have huge deposits of copper, cobalt, diamonds, platinum and gold.

ENRC's main products are ferrochrome, a key component of stainless steel, and iron ore, the raw material for steel, but the group also produces aluminium and has an energy division.

ENRC posted better than expected interim results on August 19 and said market conditions were improving.

The firm, which had gross available funds of $2.0 billion at the end of June, has said it had been looking for acquisition opportunities.

To buy the whole group, ENRC would need to get on board CAMEC's biggest shareholder, Israeli-based resources investor Dan Gertler, who has a holding of about 35 percent.

Gertler's DGI Group was not immediately available for comment.