MAC/20: Mines and Communities

Zijin Says Half of Monterrico Investors Accept Offer

Published by MAC on 2007-04-12

Zijin Says Half of Monterrico Investors Accept Offer

By Chanyaporn Chanjaroen, Bloomberg News Service

12th April 2007

April 12 (Bloomberg) -- Zijin Consortium, a Chinese group including the nation's biggest copper smelter, said shareholders holding more than half the voting rights in Monterrico Metals Plc accepted its offer, meeting the requirement for a takeover.

Zijin has acceptances from investors representing 13.2 million shares, or 50.2 percent, of London-based Monterrico, Zijin said today in a statement distributed by the Regulatory News Service. The group extended the offer deadline to April 27, from tomorrow.

``It's a very good deal for Zijin as they have acquired Monterrico very cheaply,'' Charles Kernot, an analyst at Seymour Pierce Ltd. in London, said in an interview. He recommended shareholders accept Zijin's offer of 350 pence a share.

Monterrico's Rio Blanco copper project in Peru has the potential to produce an estimated 191,000 metric tons of copper a year. China is the world's largest consumer of the metal, used in wiring and plumbing. Shares of Monterrico gained 10 pence, or 3 percent, to 347.5 pence as of 11:12 a.m. in London. The stock has risen 13 percent in the past 12 months, valuing the company at 91.4 million pounds ($180.6 million).

Share Suspension

Based on its offer, Zijin will pay $21 per metric ton of copper equivalent resource at Rio Blanco, Kernot said. That's 30 percent less than the size-adjusted $30 per ton paid in other copper-mining deals such as the purchase by Rio Tinto Plc of a 20 percent stake in Canada's Northern Dynasty Minerals Ltd., Kernot said. Rio bought tranches of Northern Dynasty, owner the Pebble copper project in Alaska, during June 2006 to January.

Local communities have protested against Rio Blanco, claiming the mine would pollute rivers and farmland. Zijin plans to spend a year working on environmental issues and reviewing Rio Blanco's feasibility study, Susan Li, a director of the group, said in an interview from Hong Kong.

``It will take another two years for construction and we hope to start production in 2010 or 2011,'' Li said.

Construction is estimated to cost about $1.4 billion, Li said. The cost probably will fall as Zijin plans to use its own equipment from China, she said.

Funding will come from loans from Chinese banks and equity finance, she said. The group expects contributions from minority shareholders. Zijin can hold up to 70 percent of Monterrico, under the terms of its offer.

Shares of Zijin Mining Group Co. Ltd., part of Zijin Consortium, were suspended from trading in Hong Kong pending a statement, company official Fan Cheung Man said today in an interview. The stock fell 1.2 percent to HK$4.78 ($0.61) before it was suspended.

Zijin Mining is also bidding for the Michiquillay copper mine in Peru. Zijin Consortium is looking to acquire more copper, lead and zinc projects, Li said. Zijin Consortium also comprises Xiamen Construction and Development and copper producer Tongling Nonferrous Metals (Group).

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