First Quantum Takeover Turns on Anglo-Rio Talk: Corporate Ca

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Message Mar 10 Avr 2012 07:44

First Quantum Takeover Turns on Anglo-Rio Talk: Corporate Ca

First Quantum Takeover Turns on Anglo-Rio Talk
By Tara Lachapelle and Liezel Hill - Apr 10, 2012 5:30 AM GMT+0200
Bloomberg

For mining companies seeking a deal in copper, no producer in the industrialized world is offering faster earnings growth than First Quantum Minerals Ltd. (FM)

Canada’s second-largest copper producer, which jumped the most in four months last week on takeover speculation, is projected to boost earnings before interest, taxes, depreciation and amortization by 84 percent over the next three years, according to analysts’ estimates compiled by Bloomberg. That’s more than any copper mining company based in developed markets and three times the industry median, the data show.

First Quantum, which operates on four continents from Europe to Africa, plans to more than triple copper production within five years as it starts up mines in Peru, Finland and Zambia, and the company’s co-founder and president said last month that the “only way” for the price of copper is up. The Vancouver-based company could attract Anglo (AAL) American Plc, which is entangled in a dispute with Chile’s state-owned copper producer over ownership of its local unit, and help Rio Tinto Group double output of the metal, Liberum Capital Ltd. said.

“First Quantum certainly has an attractive growth platform in copper, which judging by the capital budgets of all of the majors is where everyone wants to be right now,” Daniel Rohr, an analyst with Morningstar Inc. in Chicago, said in a telephone interview. “Potentially a cheap way of buying into that market is to go buy a company like First Quantum.”

Sharon Loung, a spokeswoman for First Quantum, which has a market value of $9.2 billion, didn’t respond to phone calls and an e-mail requesting comment.
Zambian Copper Mine

James Wyatt-Tilby, a spokesman for London-based Anglo, and Tony Shaffer, a spokesman for Rio (RIO), also headquartered in London, declined to comment on whether the companies have considered buying First Quantum.

First Quantum operates the Kansanshi copper mine in Zambia, which it’s expanding, and the smaller Guelb Moghrein copper and gold operation in Mauritania. The company is planning a new mine, Sentinel, in Zambia, and will build a copper smelter at Kansanshi to process ore from the two mines in the country. First Quantum said March 6 that it anticipates production of as much as 290,000 tons of copper this year.

Outside of Africa, First Quantum restarted the Ravensthorpe nickel mine in Western Australia in October, almost two years after agreeing to buy the asset from BHP Billiton Ltd. The company is building a nickel and copper mine in Finland and is also studying a copper project in Peru.
‘Focus in Africa’

Nickel production will rise to “well over” 100,000 tons a year as projects in Australia and Finland ramp up, compared with as much as 40,000 tons this year, according to estimates from the company and Clive Newall, the president and co-founder.

First Quantum is appealing “because of its focus in Africa,” said Larry Seruma, a New York-based portfolio manager for Nile Capital Management LLC’s Nile Pan Africa fund, which owns First Quantum shares. “The company’s nickel assets are also attractive, but I think the real attraction would be the copper assets.”

As mining production increases, analysts project that First Quantum’s Ebitda will reach $2.35 billion in 2014, an 84 percent gain from 2011, estimates compiled by Bloomberg show. That compares with a median of 25 percent growth among copper mining companies with market values of at least $1 billion, the data show. It’s also the highest rate among companies operating in developed markets.

Shares of First Quantum rose 7.1 percent on April 5 after The Guardian newspaper said on its website, without citing anyone, that there was “talk” Rio, Glencore (GLEN) International Plc and a company based in China may be looking at First Quantum.
Coal to Diamonds

The same day, Ash Lazenby, a London-based analyst at Liberum Capital, said in a note that Anglo and Rio are among probable bidders.

Anglo, which mines for everything from diamonds to platinum and coal, is the most likely acquirer, according to Lazenby. Buying First Quantum would restore some of Anglo’s copper volume after it sold a 24.5 percent stake in its Anglo American Sur SA unit, which includes the Los Bronces copper mine in Chile, to Mitsubishi Corp. in November, he wrote. Codelco, based in Santiago, is seeking to exercise an option dating from 1978 to buy 49 percent of Anglo American Sur and says the stake sale to Mitsubishi was an attempt to block its option.

With only $1.14 billion in net debt, Anglo also has “arguably the best balance sheet” among the larger U.K. mining companies and First Quantum’s Ravensthorpe nickel mine would complement the $49 billion company’s existing nickel business, Lazenby wrote.

Rio Tinto, Glencore

Balance sheets at the largest mining companies are “better than pristine,” Ken Hoffman, a Princeton, New Jersey-based metals and mining analyst for Bloomberg Industries, said in a phone interview. Those companies are “always out there looking for the next big mine or good asset. Any good assets -- and, in general, people believe these First Quantum assets are good assets -- are highly valued. You’re going to see deals.”

Rio, the world’s third-largest mining company, also has “adequate firepower to seek a deal” and would be able to double copper production by acquiring First Quantum, Lazenby said. Copper accounted for about 11 percent of Rio’s more than $60 billion in sales last year, data compiled by Bloomberg show.

Glencore, the commodities trader seeking to acquire Xstrata Plc (XTA), may also be interested in First Quantum, said Craig Macadam, a Toronto-based portfolio manager at Aurion Capital Management Inc., which oversees C$5.5 billion ($5.5 billion), including First Quantum shares.
Risks in Africa

“I’ve always thought Glencore was a natural buyer,” he said in a phone interview. First Quantum owns a minority stake in Glencore’s Mopani Copper Mines in Zambia.

Simon Buerk, a spokesman for Baar, Switzerland-based Glencore, declined to comment on whether the company is considering a bid for First Quantum.

Kerry Smith, a Toronto-based analyst at Haywood Securities Inc., and Morningstar’s Rohr said First Quantum’s operations in risky areas may deter buyers. The stock dropped the most in four months on March 6 after workers at its Kansanshi mine in Zambia went on strike over pay demands.

Still, some mining companies, including Rio, are increasingly looking for deposits in regions with high political and security risk to help meet commodities demands from China and India, Michael Humphreys, managing director at strategic consultancy Control Risks in Sydney, said in an interview last month.
Copper Prices ‘Up’

At a March 15 conference in London, First Quantum’s Newall said that “the only way, really, for copper prices is up” in the coming years as demand for the metal expands in China, India and Brazil. Copper for delivery in three months on the London Metal Exchange closed at $8,361 a ton on April 5.

The metal used in electric wire, roofing and plumbing may average $8,377 next year before dropping to $8,000 in 2014, according to the median of analysts’ estimates compiled by Bloomberg.

With an enterprise value of almost $9.4 billion, First Quantum is valued at about $303 per metric ton of its copper equivalent reserves and measured, indicated and inferred resources, according to data compiled by Bloomberg Industries analysts Andrew Cosgrove and Hoffman. That’s based on the median of analysts’ estimated prices for the metal in 2015, and it’s less than the average of almost $521 per metric ton among similar-sized companies primarily focused on copper mining, the data show.
Takeover Premium

“There’s not many good operating copper companies out there,” Raymond Goldie, a Toronto-based analyst at Salman Partners Inc., said in a phone interview. “It’s much cheaper to go out and buy copper in the stock market than to buy it on the London Metal Exchange or to go out and find it yourself.”

First Quantum could fetch between C$33 and C$37 a share in a takeover, according to Seruma of Nile Capital, or as much as a 91 percent premium to yesterday’s closing price of C$19.40. Macadam of Aurion Capital says a premium of about 35 percent may be enough to close a deal, indicating a takeover price of more than C$26 a share.

“First Quantum is really trading at a discount to its true value,” Seruma said in a phone interview. “For a larger player, they would see this as an opportunity to buy at a very cheap price.”

http://www.bloomberg.com/news/2012-04-1 ... anada.html
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Message Mar 10 Avr 2012 15:02

First Quantum is target: U.K. newspapers

First Quantum is target: U.K. newspapers
4/9/2012 2:11:19 PM | Stockhouse Editorial Staff

The articles mention that the company’s board could be called upon to defend a bid approaching north of $30 a share versus last Thursday’s close of $18.38.

Several U.K. newspapers speculated last week that First Quantum Minerals Ltd. (TSX: T.FM, Stock Forum) may be a takeover target.

The speculation surrounding First Quantum was duly noted by Canaccord Wealth Management in its Morning Coffee newsletter on Monday.

"There is talk that Rio Tinto PLC’s (NYSE: RIO, Stock Forum), Glencore International Plc, and possibly a Chinese company may be looking at FM," the paper wrote.

The articles mention that the company’s board could be called upon to defend a bid approaching north of $30 a share versus last Thursday’s close of $18.38.

A Bay Street analyst notes that the merger could make strategic sense to these parties as FM's largest assets (Kansanshi and Sentinel) are located in Zambia, which is near Glencore's Mufulira copper smelter and also Rio Tinto’s Palabora smelter, and producers are always looking to secure more offtake to feed their smelters, especially given the tightness in the copper market expected longer term.

Down 2% to $19.31 on Monday, First Quantum has a market cap of $9.2 billion, based on 476.3 million shares outstanding. The 52-week range is $29.13 and $12.60.

http://www.stockhouse.com/Community-New ... newspapers
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Message Ven 13 Avr 2012 20:35

Takeover rumours hit First Quantum

Takeover rumours hit First Quantum
Published Friday, Apr. 13, 2012 1:58PM EDT
Last updated Friday, Apr. 13, 2012 2:06PM EDT

The stock of one of Canada’s largest pure play copper companies has been on a tear as investors bet its chunky assets across four continents have come into the sights of rich rivals desperate to replenish reserves.

By mid-afternoon Friday, when profit taking shaved 5 per cent from its valuation, First Quantum Mineral (FM-T21.74-0.80-3.55%) shares had aggregate gains of 19 per cent over 11 trading sessions after reports out of London that the Toronto-based miner may be in the sights of several mining giants.


There are rumours that a number of global mining majors may be interested in looking at First Quantum’s assets. Among those speculated to be in this category are such giants as Glencore and Xstrata, currently trying to merge, BHP Billiton, Rio Tinto and Anglo American.

It’s not the first time such rumours have appeared, and there’s little evidence they are any more than talk but, bankers admit, any copper or diversified miner would have compelling reasons to buy First Quantum in today’s tight copper market.

“For any mining company that wants to buy a long-term copper asset, its much cheaper to buy it on the equity market than on the London Metal Exchange. So that’s why I would think it likely,” said Raymond Goldie, an analyst with Salman Partners in Toronto who has a $28 price target on First Quantum shares, now trading around $21 per share.

“On the other hand, we’ve been here a few times before. Every time First Quantum shares get down, we get this kind of rumour.”

Copper has been one of the most in-demand commodities of the last decade, driven by ravenous and seemingly limitless demand from China, which is using it to build roads, power grids and entire cities in a massive urbanization drive.

Prices for copper, an excellent conductor of heat and electricity used in everything from electrical wires to roofing and plumbing and industrial machinery, are at some $3.70 (U.S.) a pound, off all time highs of near $4.60 per pound, but still more than six times what they were nearly a decade ago.

None of the companies signalled in media reports have commented on the speculation and First Quantum did not return calls for comment.

First Quantum is a mid-tier producer, with copper output of some 265,000 tonnes per year from its flagship Kansanshi mine in Zambia and another in Mauritania called Guelb Moghrein.

The draw to First Quantum is not so much about what it’s producing as it is about projects in Zambia, Peru and Finland that promise to thrust it into the major leagues, with annual production of more than a million tonnes of copper per year.

New capacity will come as First Quantum boosts capacity at Kansanshi and brings a new mine on in Zambia. The so-called Trident project is targeting commercial production in 2014 and will eventually add 300,000 tonnes of copper to annual output.

Faced with a deficit of projects to develop, pressure is building on global miners to bring new copper output on line. For many, the only avenue open to them for growth is to buy or merge with their peers, and they have plenty of cashflow from the copper boom to help make that happen.

In December, Polish copper producer KGHM Polska Miedz SA announced plans to buy Toronto-listed Quadra FNX mining for $3-billion in cash. Also last year, Canada’s Barrick Gold Corp., the world’s largest gold miner, took what might prove a prescient step with a $7.3-billion bid for Equinox Minerals.

“In terms of a First Quantum takeover, I would've thought that if the Glencore/Xstrata merger was successful that the combined company's target could very well be First Quantum, as there may be some synergies with Glencore in Africa and Xstrata's presence in Peru could aid in the development of (the) Haquira (project),” said Shane Nagle, a research analyst with National Bank Financial in Toronto.

“Recently there's been speculation of BHP and Rio Tinto being interested as well,” he said via e-mail from a mine visit in Peru.
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