Mvela Resources says suitors are likely

Reuters | Wed, 06 Jan 2010 10:15
[miningmx.com] -- SOUTH Africa's Mvelaphanda Resources (Mvela Resources) expected to draw bidders attracted by its huge platinum project, but declined to comment on a report that Kazakh group Eurasian Natural Resources Corporation (ENRC) had made a takeover approach.

London-listed ENRC also declined on Tuesday to comment on a report on Miningmx which said ENRC was holding talks with Mvela Resources about a possible bid. An analyst said the report was credible.

Mvela Resources, a holding company which plans to delist and spin off stakes to shareholders, has a market value of R11.17bn ($1.43bn).

Mvela's executive commercial manager, James Wellsted, declined to comment on the report about ENRC, but said interest was likely from potential bidders.

"There's clearly going to be some interest, whether it's from ENRC or another platinum producer, I'm sure people are looking at us," he told Reuters.

Mvelaphanda is a mining investment vehicle that owns stakes in several firms, including a 62.8% holding in South Africa's Northam Platinum.

"There's been quite a significant change in the outlook for the PGM (platinum group metal) market - the prices are a lot higher - and obviously Northam and Booysendal offer a very attractive suite of assets."

Peter Major, an analyst at Cadiz Corporate Solutions, said he was 'wary' of the speculation that ENRC would bid for Mvela Resources.

Bloomberg News quoted Major to have said: "You've got to be wary of any company from the former Soviet Union. There's (no regulatory body) watching these guys. It's only a rumour that they are bidding, but the share price is rising. It's a lot to run just on rumour.

"Maybe they want to buy (Mvela's) mine at a discount. We're starting to wonder if they are real. I've grown cynical about these kind of deals."

Mvela Resources shares rose 7.4% on Tuesday to R52/share but retreated 2.3% in early trade on Wednesday. The share was last trading at R50.80/share valuing Mvela Resources at R11.17bn.

Huge platinum project

Northam owns the Booysendal project, which is estimated to have resources of over 100 million ounces, making it one of the world's biggest undeveloped platinum deposits.

"We view the speculation as credible given ENRC has previously been linked to a bid for Northam Platinum, with any acquisition once again highlighting both the convergence of the FeCr (ferrochrome) and platinum industries," Liberum Capital said in note.

ENRC is one of the world's biggest producers of ferrochrome. Chrome ore is often found in the same deposits as PGMs or near PGM deposits.

Northam, which already produces about 300,000 ounces a year in PGMs from the world's deepest platinum mine, said in October it planned to launch construction at Booysendal this year.

Wellsted said Mvela was pushing forward with plans to unbundle its assets to shareholders early this year, but would consider takeover offers.

We view the speculation as credible given ENRC has previously been linked to a bid for Northam Platinum, with any acquisition once again highlighting both the convergence of the FeCr (ferrochrome) and platinum industries

"We will continue with our strategy ... but at the same time, if someone comes and makes an offer that makes sense from a value and a strategic perspective for our shareholders then clearly we've got to look at that."

When ENRC agreed a $955m cash deal to buy Central African Mining and Exploration Co (Camec) in September, it said it was looking for more takeovers.

ENRC's takeover of CAMEC marked its first foray into Africa and an ENRC official told Reuters that the group wanted to build a mining powerhouse along the lines of acquisitive Xstrata, but focus on higher risk emerging nations.

ENRC had gross available funds of $1.95bn at the end of June 2009.