Brazil and China are heading for a battle of strategic necessity over copper in Africa that will leave the winner walking away with the most expensive acquisition of a diversified minerals company.
Two people familiar with the deal said that Jinchuan Group is considering a bid for Johannesburg based Metorex Limited to rival Vale SA’s offer. Metorex is trading 6.1% above Rio de Janeiro based Vale’s proposal of ZAR 7.35 per share, the most of any pending deal in Africa, making it the likeliest to garner a higher price tag.
Vale and Jinchuan are seeking Metorex’s copper and cobalt mines in the Democratic Republic of Congo and Zambia after demand in China for copper used in construction and appliances pushed the metal to a record this year.
First Asset Investment Management Inc said that Vale’s ZAR 7.9 billion offer already values Metorex at 30.2 times earnings before interest, taxes, depreciation and amortization, the richest diversified minerals takeover greater than USD 1 billion. Bids may reach ZAR 10 per share.
Mr Andrew Ross partner and global equity trader at First New York Securities LLC said that “The Chinese and the Brazilians have voracious appetites” for mining. They view themselves in direct competition for these strategic natural resource assets.”
Mr Jacques de Bie spokesman for Metorex referred to the company’s June 17 statement disclosing an unsolicited, non binding expression of interest from another party. He said that it’s not yet a bid or a firm offer or a firm intention to make an offer. It’s just an expression of interest at this stage.
Mr John Stephenson who helps manage CAD 2.7 billion at First Asset Investment in Toronto said that “Good copper assets are hard to find and Zambian copper assets are prized. Both Vale and Jinchuan could use the copper exposure and it would be a huge benefit for both.”
Mr Anthony Rizzuto an analyst at Dahlman Rose & Company said that “Vale has not been successful thus far in building out a meaningful copper business with their assets in Brazil. You’re looking at a company that has and needs to pay up to be able to expand this business which they regard as being very strategic in nature.”
Mr Yang Zhiqiang chairman of Jinchuan said recently that the closely held company is looking to buy stakes in overseas copper mines. The Gansu Province based company produced about 400,000 tonnes of copper, 130,000 tonnes of nickel and 6,000 tonnes of cobalt last year.
Mr Bernard Horn Jr president of Boston based Polaris Capital Management LLC said that “Copper and cobalt are in strong demand in China. So it certainly doesn’t surprise me that some Chinese buyers are potentially interested.”
China agreed in January 2008 to help rebuild Congo in return for access to copper and cobalt. Congo has a third of the world’s cobalt, which is used in medical implants and rechargeable batteries. Premier Mr Wen Jiabao said in February that China, the world’s largest user of copper plans to build 36 million affordable homes in the next 5 years.
(Sourced from Bloomberg.net)
