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Gencor base metals arm seen as new powerhouse
Reuters Story - June 18, 1997 22:22
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By Eric Onstad
LONDON, June 18 (Reuter) - The planned flotation in London
of the base metals interests of South Africa's Gencor Ltd
should forge a new multi-national powerhouse on the
world mining stage.
The new company, Billiton plc, will be well positioned with
other big players to buy up small mining operations which may be
undervalued in the wake of the Bre-X gold scandal this year,
mining analysts in London said.
"This is extremely good news. We get a new FTSE-100 company
with very good management. It's a pity it took so long," said
analyst Emil Morfett of Paribas Equities.
The new Billiton will be one the largest and lowest-cost
producers of aluminium, the leading producer of ferroalloys and
the world's largest exporter of thermal coal.
The firm is set to raise over $1 billion in an equity
placement in July, with the shares beginning trading in August.
"This is three or four times what would have been possible
to raise if we had stayed in South Africa," Gencor finance
director Mick Davis told mining analysts in London.
"They are now in a position to start growing their
business," Morfett said, adding the financing will give it the
muscle to enter the big league and to compete with the likes of
Rio Tinto .
"They may be quite aggressive in terms of increasing their
production capacity and market share," added analyst Robin Bhar
of metals broker Brandeis.
They would be looking to inject capital into joint ventures
as well as grabbing smaller companies, analysts said.
Davis said the new firm has a long list of potential
projects on the horizon, with the main focus on four geographic
areas -- southern Africa, Latin America, Australia and
Indonesia, where Billiton was founded 137 years ago.
One of most exciting opportunities could be the possibility
of installing a third train to the Worlley alumina refinery in
Western Australia, Davis said.
Others prospects included building a new aluminium smelter
at Mozal, Mozambique and participation in the CVG aluminium
privatisation in Venezuela.
The company has also established an office in Beijing. "We
feel China could provide some very interesting opportunities,"
said Dave Munro, an executive director of Gencor and of the new
firm.
The move to establish an international mining firm comes at
an opportune time after the Bre-X scandal.
Investors are shying away from marginal exploration
companies after the Busang property in Indonesia, sold as the
biggest gold find ever by Canadian exploration firm Bre-X, was
found to have been a hoax.
"The fallout from the Bre-X fiasco means the multi-nationals
are now at a big advantage. They can perform their due diligence
on these small firms slowly without pressure from the equity
market," Morfett said.
The restructuring announced Wednesday included the merger of
Gencor's nickel interests with Australia's QNI Ltd to
create the world's fourth largest nickel producer.
A main advantage would be to create a producer to compete
with Inco Ltd's Voisey Bay project, expected to come
onstream around the turn of the century, analysts said.
The Voisey Bay project, a very low cost producer, is forcing
everyone else to be low cost producers, Bhar said.
"There is this window of opportunity now until Voisey Bay
starts up...so there might be well some attempt to fast track
some deposits in an attempt to get market share," he added.
Combined production costs of QNI and Gencor nickel interests
were currently around $2.00 per lb, said Chris Pointon, head of
Gencor nickel division. He declined to give a new lower target
but noted historical costs at Colombia's Cerro Matoso, due for
expansion, have been around $1.60 to $1.80.
--London Newsroom +44 171 542-8065 |
