UPDATE 2-Allegiance lifts nickel resource estimate
Tue Jan 15, 2008 1:22am EST
reuters.com
(Adds Zinifex reaction)
By James Regan
SYDNEY, Jan 15 (Reuters) - Allegiance Mining Ltd (AGM.AX: Quote, Profile, Research), fighting a hostile takeover from fellow Australian Zinifex Ltd (ZFX.AX: Quote, Profile, Research), said its nickel mine holds around 10 percent more nickel than it previously thought.
Allegiance is one of a handful of start-up mining companies in Australia catching the eye of established miners looking to acquire more assets to ride the boom in industrial raw materials.
The miner on Tuesday upgraded the resource at its Avebury project in the island state of Tasmania by 14,000 tonnes to 172,000 tonnes, based on new exploration work, ahead of its promise to kick off nickel production this quarter.
The extra tonnage is worth around $400 million, based on London Metal Exchange nickel price of around $29,000 a tonne.
Allegiance stock rose nearly 2 percent to A$1.065 on news of the upgrade, twice the price it was a year ago and further distancing the stock from Zinifex's A$1 a share offer.
Zinifex later on Tuesday issued a statement saying it had already factored in the mine's expansion potential before making its offer.
"Zinifex will try and stick to their price if they can get it, but I don't think they will at that price now," said Keith Goode, an analyst for Eagle Mining Research in Sydney.
Allegiance Chairman Tony Howland-Rose said more exploration work could see the size of the mine grow even larger.
"The possibility for a major expansion in the size of the company's nickel business through exploration success in coming years is very high," Howland-Rose said in a statement.
Jinchuan Group, the largest refiner of nickel in China and Allegiance's largest shareholder with 10.4 percent, last week said the Zinifex offer was too cheap.
Zinifex Chief Executive Andrew Michelmore has said Allegiance still needs significant funding to realise its potential.
Zinifex's all-cash offer is initially worth 90 cents a share, though the company pledged to lift the bid to $1.00 if it gets more than 30 percent acceptances or board approval.
At 90 cents a share, the deal is worth A$697 million ($628 million), increasing to A$745 million if the bid is lifted to $1.
The Avebury mine, about 30 kilometres (19 miles) from a Zinifex zinc mine, is expected to yield 8,500 tonnes of nickel annually.
While demand for nickel was strong, promises of new supplies have pushed back prices for the metal, which have recoiled from an all-time high of $51,800 per tonne hit last May.
Zinifex's offer is the latest in a series of takeovers being played out in Australia's mining sector, led by BHP Billiton's (BHP.AX: Quote, Profile, Research) (BLT.L: Quote, Profile, Research) proposed offer for Rio Tinto (RIO.AX: Quote, Profile, Research) (RIO.L: Quote, Profile, Research), worth around $140 billion when it was announced on Nov. 8.
Anglo-Swiss miner Xstrata Plc (XTA.L: Quote, Profile, Research) is offering A$3.1 billion for another Australian nickel miner, Jubilee Mines NL (JBM.AX: Quote, Profile, Research).
Other potential predators in the nickel sector include Brazil's Vale (VALE5.SA: Quote, Profile, Research)(RIO.N: Quote, Profile, Research) and Russia's Norilsk (GMKN.MM: Quote, Profile, Research), which outbid Xstrata earlier this year for another Australia nickel miner, LionOre, analysts said. ($1=A$1.11) (Reporting by James Regan; Editing by James Thornhill) |
