Andrew Michelmore, chief executive officer of Minmetals, attends a news conference in Hong Kong Monday. The city-listed unit of China's biggest metals trader made an unsolicited offer of about C$6.3 billion ($6.5 billion) for Equinox Minerals Ltd. Jerome Favre / Bloomberg

Firm offers C$6.3b for Australia-based miner Equinox

Minmetals Resources Ltd, the city-listed unit of China's biggest metals trader, said on Monday that it has made a 6.3 billion Canadian dollar ($6.5 billion) cash offer for Australia-based Equinox Minerals Ltd, which has mining assets in Zambia and Saudi Arabia, among others.

The hostile bid, which would be China's biggest minerals takeover if it meets the approval of regulators in China and Australia, will allow Minmetals to gain control of Africa's largest copper mine.

Minmetals bid C$7 a share, 23 percent more than Equinox's closing price in Toronto on April 1, the Hong Kong-based company said Monday in a statement.

Equinox, which is based in Perth, Western Australia, is listed in Toronto and Sydney. News of the bid sent the stock's share price soaring 29 percent or A$1.63 in Sydney on Monday to A$7.34. Minmetals rose 2.4 percent in Hong Kong on Monday to HK$6.72 per share after jumping as much as 3.7 percent.

In a separate statement Monday, Equinox said its board will meet and discuss the unsolicited bid, and will decide whether to accept it after evaluating the terms and proposed valuation.

The offer premium of 33 percent to the volume weighted average Equinox share price of the past 20 days compares with an average premium of 24 percent for resources deals of at least $500 million during the past year, according to data compiled by Bloomberg.

Andrew Michelmore, chief executive officer of Minmetals, told a press conference in Hong Kong that the offer is attractive to shareholders of Equinox and he expects the deal to be completed in the middle of this year.

The deal requires regulatory approval from both Chinese and Australian regulators. Minmetals filed an application with Australia's Foreign Investment Review Board on March 11. An application with China's top economic planner is also in the process, according to Michelmore.

Over the past year, Michelmore has been building a stake in Equinox and now owns 4.2 percent of the Perth-based target.

In the statement, Minmetals said the deal will be financed through cash at hand, loans from Chinese banks and long-term credit facilities and equity, including investments in Minmetals by Chinese institutions. State-owned China Minmetals Corp owns 75 percent of Minmetals.

If the takeover succeeds, it will lift the portion of copper in Minmetals's total production to 60 percent in fiscal 2015 from 25 percent now, according to the company.

"It fits perfectly into the key areas we want to grow in, extending our mine life, expanding our portfolio of regions, leveraging on our management and technical expertise to extract value and most importantly it's supported by our majority shareholder," Michelmore said during a media conference call. He also believes that copper prices will remain high, given that tight supply is likely to continue.

Copper is a vital raw material in various industries, such as construction and electronics. China, the world's second-largest economy, accounts for around 38 percent of global refined copper demand, according to HSBC Global Research.

In an industry report issued by BOCOM International in January, the research house argued that since 40 percent of China's total consumption is imported, the country's "heavy reliance on imports reflected supply shortage".

"Given the ample market liquidity, we believe copper price will continue to surge higher in 2011 due to its robust demand," said the report.

Three-month copper on the London Metal Exchange rose $2.25 to $9,361.25 a metric ton at 06:46 GMT in Monday trading.

Equinox's share price rose 30.4 percent, or up C$1.74, to C$7.45 in early Monday trading in Toronto.

Bloomberg and Reuters contributed to this story.

China Daily

(HK Edition 04/05/2011 page3)