Rio Narcea resists $1-billion bid
MINING
theglobeandmail.com
Rio Narcea resists $1-billion bid
Amid record nickel prices, Lundin contemplates whether to increase offer or back out
ANDY HOFFMAN
MINING REPORTER
June 1, 2007
Fast-growing Lundin Mining Corp.'s ambitions to jump into the booming nickel sector have hit a snag with shareholders of Rio Narcea Gold Mines Ltd. resisting the $1-billion takeover bid and holding out for a better offer.
Paulson & Co., an aggressive U.S. hedge fund, revealed yesterday that it has amassed 19.9 million shares of Toronto-based Rio Narcea, a 12-per-cent stake in the company which owns and operates the Aquablanca nickel mine in Spain.
Credit Suisse Securities Ltd. has also boosted its holdings since Lundin unveiled the $5-a-share offer on April 4. Credit Suisse now owns 8.5 million Rio Narcea shares.
Lundin was forced to extend the friendly, all-cash bid to June 11 after failing to win over two-thirds of Rio Narcea shareholders. Rio Narcea's stock has climbed well above the bid price and closed yesterday at $5.60, up 9 cents on the Toronto Stock Exchange.
"They are not going to get it on this bid," said Charles Oliver, manager of the AGF Canadian Resources Fund, whose firm owns about 3.5 million Rio Narcea shares.
The Aquablanca mine produces 14 million pounds of nickel a year and a similar amount of copper. Nickel prices hit a record $51,800 (U.S.) a tonne in early May and closed yesterday at $46,200 a tonne on the London Metal Exchange.
Mr. Oliver said he is in no rush to unload Rio Narcea. "A company that's generating cash flow like this, I'm happy to have in my portfolio."
Lundin's vice-chairman, Colin Benner, said the board has not decided whether to increase the bid or walk away. "Admittedly, the price of nickel has gone up. But we have to base it on the long-term view on nickel, not the short-term frothy view right now. We're going to take it under serious consideration and deliberate over the extension," he said.
Mr. Benner said a meeting with Paulson & Co. officials has been scheduled for next week. "There's some opportunistic activities going on in the market place," he said of the hedge fund's activities.
Hedge funds played a crucial role in the battle for Inco Ltd. and Falconbridge Ltd. last summer. They rejected a stock-and-cash bid to combine the Canadian nickel stalwarts with a U.S. copper firm, preferring all-cash offers from Companhia Vale do Rio Doce (CVRD) and Xstrata PLC.
Rio Narcea is one of the few operating nickel producers left on the TSX and the dwindling number of players has prompted a bidding war for LionOre Mining International Ltd., which has seen the bidding for the once-struggling company rise to $6.8-billion. Dynatec Corp., which owns a stake in a nickel project in Madagascar, is set to be swallowed by Sherritt International Corp.
Mr. Benner played down the quality of the Rio Narcea nickel assets, pointing out that the mine's life expectancy runs only until 2015.
"You're not talking about long-term assets. It is in close proximity to our operations in Portugal which gives us some synergistic advantages over other potential bidders," he said. "We made it very clear when we made our initial bid we were at the top end of the range."
RIO NARCEA GOLD MINES
Close: $5.60, up 9 cents
LUNDIN MINING
Close: $13.04, up 4 cents
Email this page to a friend
Report Abuse
|
