[miningmx.com] — METOREX shares staged a small comeback on Tuesday, notwithstanding falls in the broader All Share index and copper prices, as worries subsided over whether its proposed takeover deal by China’s Jinchuan Group was in danger of being terminated.
At 14:40 Metorex was trading up 1.15% at 789c per share, with the JSE Alsi down 2.33% and copper lower for a fifth day in succession at $6,815/tonne on the London Metals Exchange, down from Monday’s close of $6,990.
Issuing a notice to shareholders, Metorex said it was still waiting on the go-ahead from Zambia’s Ministry of Finance as well as the consent of Chinese authorities, after competition regulators in both South Africa and Zambia gave their blessing for the deal.
“Jinchuan.believes the process is progressing well and anticipates receiving the relevant approvals and consents in due course,’ read a company statement. It said both parties did not anticipate any change to the completion date of the deal, set for November 18.
Metorex has mostly traded inside a band of between R8.17 and R8.68 since July when Jinchuan announced its intention to buy the JSE-listed copper producer at R8.90 per share in a R9.1bn deal, but the difference between the trading and offer prices grew during the past two weeks on fears the Chinese commodities giant might be having second thoughts.
The falling copper price, as well as regulatory hurdles in both Zambia and China were put forward as reasons as to why the deal could be headed for troubled waters.
Miningmx reported on Monday analysts were unconcerned over this, saying neither the depreciation of the copper price, nor a fallout from Zambian President Michael Sata’s election victory should be viewed as negative catalysts for the deal. Sata has in the past been critical of Chinese miners.
However, in another development Zambia’s new Finance Minister, Alexander Chikwanda, cancelled the sale of that country’s Finance Bank to South Africa’s FirstRand, soon after firing the governor of Zambia’s central bank. The government is yet to give any reasons for the move.
Imara SP Reid’s Steve Meintjes, who has rerated Metorex as a “buy’, said there was no comparison between the circumstances of the Finance Bank sale and the Metorex deal.
“It’s a different situation,’ he said. “It involves different sectors and the shareholders of the bank were objecting to the deal. The Metorex deal was signed off months ago.’
He said Sata’s criticism of Chinese miners was directed at smaller operations which reportedly had dubious business practices. “Here you have a flagship state-controlled entity which represents the prestige of the country,’ Meintjes said in reference to Jinchuan. “You cannot think they will follow anything else than best practices.’
In a research note published on Monday, UBS Investment Bank said Metorex’s Zambian operations represented only 2% of the country’s copper output, so it was unlikely that the new government would focus too much on the deal.
“The Chinese are the biggest investors in Zambia, and the Zambian government is more critical of labour practices as opposed to investments,’ the note read.
“He (Sata) stated post his victory that he welcomes foreign investment and pledged to maintain ties between Zambia and China. The new Mine Minister made comments that mining taxes need to be reviewed, but, this will be in consultation with mining companies.’
