MAC: Mines and Communities

Chinese, B.C. miner reach a deal

Published by MAC on 2007-12-07


Chinese, B.C. miner reach a deal

7th December 2007

by The Canadian Press

VANCOUVER -- Northern Peru Copper Corp. has struck a $455-million deal to be taken over by two Chinese companies after an auction by the B.C.-based miner aimed at developing its Galeno copper project in South America.

Northern Peru, which operates in the South American country, announced yesterday it had agreed to be sold to state-owned China Minmetals Corp. and Jiangxi Copper Co., a publicly listed Chinese metal producer.

Vancouver-headquartered Northern Peru Copper said 27 companies examined the miner's technical information as it sought a major mining company to acquire and develop its Galeno copper-gold-molybdenum project in Peru.

China Minmetals Nonferrous Metals Co. and Jiangxi are offering $13.75 a share in cash, a 21-per-cent premium to Wednesday's price on the Toronto Stock Exchange. News of the deal helped propel the junior miner's stock price nearly 20 per cent higher.

The deal continues a trend by Chinese companies to buy commodities to feed the Asian giant's rapidly growing industrial production. Chinese firms have already made acquisitions of oil and gas producers and have been eyeing mineral developers around the world.

In August, China's largest state-owned mining company, Aluminum Corp. of China, or Chinalco, bought Vancouver-based Peru Copper Inc., gaining control of the massive but relatively low-grade Toromocho project east of Lima. Chinalco said this fall it plans to make more overseas copper acquisitions, and analysts have speculated it would be a candidate to take over Jiangxi as part of a consolidation of China's fragmented copper industry.

Two years ago, Minmetals failed in its bid to buy Toronto-based iconic metals miner Noranda Inc., before that company merged with its Falconbridge Ltd. subsidiary and eventually was acquired by Swiss-based Xstrata PLC.

Northern Peru Copper said its board has unanimously endorsed the deal, and insiders holding 42 per cent of the company's stock have entered into lock-up agreements. The deal carries a $16-million break fee.

Northern Peru chairman Ross Beaty said 18 of the 27 companies that signed confidentiality agreements visited Galeno and completed technical due diligence on the prospect, described by the company as one of the largest undeveloped copper resources in the Americas.

"Minmetals and Jiangxi presented us with the best offer to acquire [Northern Peru] and we are happy to accept their offer," Mr. Beaty stated.

"Both are large companies with extensive experience in the copper sector, and are fully capable of developing Galeno into one of the world's premier copper mining operations."

The Galeno site is said to be capable of producing an average of 144,000 tonnes of copper concentrate a year over a 20-year mine life, including 200,000 tonnes annually in the first five years.

A preliminary feasibility study found it will generate 3,600 construction jobs and "approximately 657" permanent jobs.

In addition to Galeno, Northern Peru owns the adjacent Hilorico gold deposit and the Pashpap copper-molybdenum site.

Minmetals and Jiangxi said they are committed to the efficient development of the Galeno project.

"The joint venture expects to continue with the first-class work that has been conducted to date by the dedicated staff of Northern Peru Copper's Peruvian subsidiary Lumina SAC," said Huang Guoping, vice-president of Minmetals.

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