Wednesday 18 June 1997
QNI is Gencor's $1b target
By BARRY FitzGERALD
Speculation ran strong yesterday that the South African mining
giant Gencor was poised to take control of QNI, the innovative
Queensland nickel and cobalt producer valued by the market at
more than $1.1 billion.
QNI fuelled expectations of the move yesterday when it asked
for its shares to be suspended pending the release of an
''announcement'' following a board meeting today.
The suspension request - a step only taken ahead of major
announcements - fired up speculation that Gencor would bid
between $3 and $3.50 a share for the company compared with
QNI's price ahead of the suspension of $2.68 a share.
But a bid at those levels would value QNI at between $1.23
billion and $1.4 billion - valuations that analysts said would be
difficult to justify even if Gencor wanted a quick ''kill''.
As a result the expectation was that Gencor was more than
likely to be proposing a strategic alliance or ''merger'' in which
there would be a pooling of the nickel assets of the two
companies. Under that scenario, Gencor could be looking to
take up to 50 per cent of the QNI operation at an imputed value
of $3 to $3.50 per QNI share, satisfied by QNI taking up an
interest in Gencor's nickel assets.
QNI's key asset is its Yabulu nickel and cobalt processing
facility near Townsville, once controlled by Alan Bond's family
company, Dallhold Investments.
Yabulu was developed using ore mined at Greenvale, 200
kilometres west of Townsville, but is now reliant on imported
lateritic ores from New Caledonia and Indonesia.
Production last year was 26,637 tonnes of nickel and 1425
tonnes of high-value cobalt. It uses an ammonia leach technology
which has been coveted by the world's biggest nickel producer,
Inco of Canada, and others.
The group's reliance on high-grade, but higher-cost, imported
ores has been an issue the company has sought to reverse.
It acquired a 67 per cent interest in a nickel development project
in New Caledonia last year and plans a $40 million development
to supply about half of Yabulu's needs.
But more significant given yesterday's events was the letter of
intent signed last year with Gencor and the Indonesian state
mining company, PT Aneka Tambang. The trio began work on a
study to evaluate the development of an integrated nickel and
cobalt processing operation in Indonesia and Yabulu.
In all, the project was said to have a value of $1.5 billion and
involved numerous mines and processing facilities being
developed in Indonesia, with Yabulu to benefit from an extra
supply of carbonate feed, an intermediate product.
QNI is about due to report back on the progress of the study
but it is believed to have hit a snag.
Speculation is that the expected proven nickel resources on
Indonesia's Halmahera island to be included in the venture are, in
fact, advanced exploration properties.
The delay in the study that would cause was another factor in the
sharemarket's conviction yesterday that Gencor was about to
move on QNI.
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