Metorex rises as new party eyes buyout

[bingogo]

China’s Jinchuan may be bidder, will have to offer more than Vale
ALLAN SECCOMBE
Published: 2011/06/20 06:50:26 AM

METOREX shares climbed 5% on Friday after the company said it had received an expression of interest to buy it, pushing its share price well above the level at which Brazil’s Vale offered to acquire the copper miner.

Shareholders of JSE-listed Metorex, which is focused on copper and cobalt mining in the Democratic Republic of Congo and Zambia, will vote on July 22 on the Vale offer of R7,35 per share made in April, which valued Metorex at R7,5bn.

The identity of the new interested party was not revealed by Metorex, but mining news website Miningmx.com said the most likely bidder was Jinchuan Group, which, with China-Africa Development Fund, has bought a 45% stake in JSE-listed junior, Wesizwe Platinum . Jinchuan is China’s largest producer of nickel and platinum group metals.

Metorex’s shares closed 5% higher at R7,66 on Friday after the company said it had "received an unsolicited, nonbinding expression of interest from a bona fide party to acquire the entire issued share capital of Metorex".

Vestact Securities MD Paul Theron told Bloomberg: "You can see from the price that the people in the know, and there are always people in the know, are obviously impressed by the quality of the bidder. Vale are not idiots. You can assume that they recognise a good value case."

Under the agreement with Vale, a new bidder would have to add 10% or more for the board to take the fresh offer to shareholders. The new offer would have to include a payment for the break fee with Vale of R74m.

The new bidder would have to make its offer ahead of the July 22 vote, which if it garners the support of shareholders, would make the Vale deal binding.

Analysts have said that Vale’s offer was on the low side and should be bumped up to recognise the value inherent in Metorex and because a pure copper play would be delisted from the JSE if the deal was successful.

Metorex has undergone a major restructuring, shedding gold, fluorspar and antimony assets to become a pure copper- focused company. It has a strong suite of projects in the Congo, where it has its Ruashi mine. The foremost of these is the old Kinsenda mine, which Metorex is bringing back into production. There are also the Lubembe and Musonoi exploration projects.

"From my calculations, just on projects, Metorex is valued at between R8 and R8,50 a share. If you bring those projects on stream today you could add another R3 to that," Afrifocus Securities analyst Richard Hart said in April.

Metorex shares have shot up from about R5,50 in mid-March, shortly before the company put out a cautionary notice advising investors it was in talks.

Metorex said on Friday the new party’s expression of interest included a number of preconditions that needed to be met before a firm intention to make an offer could be made. These include a due diligence . Metorex will make the same information available that it did for Vale.