China snaps up another African copper player

[miningmx.com] — CHINA’S Minmetals Resources has agreed to buy Africa-focused copper miner Anvil Mining for $1.28bn as the state-controlled company expands its global reach and adds base metal reserves.

Minmetals’ latest acquisition comes nearly five months after it bowed out of a bidding war to buy Canadian copper miner Equinox Minerals and underscores China’s growing appetite to secure supplies of natural resources to support the urbanisation of its vast population.

Minmetals is offering C$8.00 a share, or a 39% premium, to Anvil’s Thursday close in Toronto stock exchange. Anvil’s depositary shares traded in Australia surged 32% to A$7.67 on Friday.

“It has been very clear that Minmetals has a mandate to make mining investment outside China,” Andrew Driscoll, head of resource research at CLSA Ltd said.

“Copper looks to be at top of their shopping list and after they decided not to counterbid for Equinox earlier in the year…the market certainly been expecting them to launch another bid,” he added.

The world’s top copper user, China accounts for nearly 40% of global copper consumption estimated at around 21 million tonnes this year. Analysts have been counting on China’s strength to help prop up copper prices which have fallen a steep 23% in September.

Chinese demand for the industrial metal is expected to rise 6% to 7% next year after an estimated 8.5% rise this year, according to analysts.

BOARD RECOMMENDS

Anvil said last month it had begun to review its strategic alternatives including a sale, sending its shares higher.

Minmetals, a government-backed unit of China’s largest metals trader, said in a statement that Anvil’s Kinsevere mine in Congo is expected to produce 60,000 tonnes of copper cathode per annum, substantially boosting the group’s copper exposure and extend its average mine-life.

Minmetals shares were down 1% at HK$2.97, while the benchmark Hong Kong share index was down 1.8%. Minmetals’ bid is subject to approval from Australian government, which in the past has raised concerns over takeover bids from China’s state-backed enterprises.

“The Anvil board has unanimously determined that the offer is in the best interests of Anvil and the Anvil shareholders, and has recommended that Anvil shareholders accept the offer,” Minmetals said in the statement.

BNP Paribas is the financial adviser to Minmetals.

Minmetals will fund the deal through a financing facility and by tapping on its own cash reserves, it said, adding that it currently does not own any common shares in Anvil.

The deal will also give a boost to mining deal volumes in Asia, after they dipped marginally in the third quarter.

Some $22.7bn worth of resources deals were launched in Asia this quarter, slightly less than the $23.1bn announced same time last year, according to Thomson Reuters data released last week. Overall Asian M&A volume totalled $88.5bn in the third quarter, down from $113.97bn last year.

“If valuation continues to be depressed because of the uncertainty in the macro outlook, I think you will continue to see more M&A activity,” CLSA’s Driscoll said.