Asia's miners await result of Chinalco’s Rio Tinto bid

The US$19.5 billion bid by Chinese aluminium giant Chinalco for a stake in multi-national miner Rio Tinto is being watched with interest by Asian mining firms who are eyeing off Australia’s cheap resources stocks.

The Chinalco bid is the latest, and largest, move by a Chinese company into the Australian resources industry and has passed all tests put before it to date, although there are several more to come.

It follows moves by other companies from China, India, South Korea and Japan into the resources sector into Australia, and particularly iron ore and coal but more recently in gold and uranium as well.

There are Asian companies involved in negotiations for equity in a number of mid-sized Australian miners but who have adopted a wait and see attitude owing to the dealings between Rio and the state-owned Chinalco.

If Australian regulators respond positively and the deal proceeds, the negotiations are likely to progress.

Another test for the deal will be the meeting of a nervous Rio Tinto board in May, although it is expected to approve the arrangement, and probably has little option but to do so.

The desire from Asian countries for resources is the main driver behind the increased interest, but also aiding the trend is the weak Australian dollar, low price/earnings ratios of Australian resource stocks and the fact that many Asian firms are cashed-up with some also underwritten by official reserves.

Chinalco has offered US$7.2 billion in the form of convertible bonds which, once converted to shares, would increase its stake in Rio from 9.3% to 18%. The bonds, which have a 60-year term, would attract annual interest of 9-9.5% and would be redeemable after seven years.

The deal would give Chinalco a sizeable stake in some of Rio's key ore, aluminum and power assets, including the vast Hamersley Iron operation in Western Australia.

It is in Rio’s interest for it to proceed as it badly needs the cash injection to clear US$38 billion of debt incurred when it bought Canadian aluminum producer Alcan in 2007. The company is committed to repay US$8.9 billion in October and a further US$10 billion next year.

Opponents argue that Rio could mortgage its future by hiving off key assets while the Australian government fears the deal could allow the Chinese effectively to dictate terms in their tortuous annual price negotiations with the resources sector.

Shareholders, especially institutional investors, will have a strong say in the outcome, as many have been angered that the offering was made to Chinalco at a premium and that they were left out.

There is still a possibility of a rival bid from another suitor, as the Chinalco deal has not yet been voted on by investors. BHP, which considered launching a formal bid last year, is one possibility, though it would mean Rio would have to pay a US$195 million ‘break fee’ to Chinalco.

Other Asian miners cannot be ruled out. China Minmetals recently wrapped up an Aus$2.6 billion takeover of OZ Minerals while Chinese steel producer Anshan Iron & Steel Group is paying Aus$162 million for a bigger stake in Gindalbie Metals.

     Yolanda Torrisi Managing editor The ASIA Miner
     Ph: +61 3 9816 8048
     Mob. +61 412261870
     This e-mail address is being protected from spambots. You need JavaScript enabled to view it

.

.

.

.

INDONESIA – Thick coal seams identified at IBP

A 4600 metre drilling program on Kalimantan Gold’s PT Indobara Pratama (IBP) coal project in Indonesia has identified two thick seams.
One seam is between 1-6 metres thick while the other is between 8 and 13 metres. The flat lying to shallow dipping nature of the seams indicates a low overburden ratio of around 2:1 (2 metres of overburden per 1 metre of coal). More News

PHILIPPINES – Canatuan sulphide project commissioned

TVI Pacific has overcome many obstacles in the past two years to bring its Canatuan Sulphide Project online and last month achieved a milestone with the first shipment of copper concentrates leaving for China .

TVI’s Philippine affiliate, TVI Resource Development (Phils), brought the commissioning phase of Canatuan operations to a close when commercial operations were declared after inventory levels reached the 5000 tonne threshold.

The shipment then took place when, as part of an offtake arrangement with MRI Trading AG, 5350 dry metric tonnes (dmt) of copper concentrates left Santa Maria Port in Siocon, Zamboanga del Norte, destined for a major Chinese smelter. More News

CHINA – Changkeng indicated gold resource up 65%

A new resource estimate for Minco Gold Corporation’s Changkeng Project in Guangdong Province , China , has resulted in a 65% increase in indicated gold ounces.

The gold portion of the resource estimate has been expanded and upgraded to contain indicated resources of 4 million tonnes @ 4.89 grams/tonne gold for a total of 623,100 ounces. The estimate also contains inferred resources of 4 million tonnes @ 3.01 grams/tonne for a total of 386,800 ounces. More News

CHINA – Caijiaying operations to resume June 1

Production at Griffin Mining’s Caijiaying zinc-gold mine in China is expected to resume on June 1.

The restart of operations has been slightly delayed due to the production of zinc, gold, silver and metal in concentrate continuing into February as ore stockpiles were utilized.

This resulted in upgrade and maintenance work on the plant beginning later than the company originally expected. More News

MONGOLIA - China buys into uranium interests

Canadian company Western Prospector Group, which has uranium interests in Mongolia , has accepted a US$25 million takeover bid from China 's CNNC International.

Western Prospector's main interest is the Saddle Hills uranium project near Dornod in eastern Mongolia , and in particular in the Gurvanbulag deposit. More News

CONFERENCES – China Mining an important discussion platform

There are many important questions facing the mining industry during the global economic downturn and many of them do not have definitive answers.

The China Mining Congress and Expo in Tianjin from October 20-22, 2009 , will provide the ideal platform to discuss many of the questions and perhaps even come up with some solutions.

The questions include: how are the mining industry and commodities affected by the financial crisis?; when will the financial crisis beat the bottom line - in the third quarter of 2009, next year or even within the next two years?; what is the role of China in the mining industry within the global downturn?; and how and where to find the business opportunities in the current situation? More News

AWARDS – FCF Minerals recognised for Philippines ’ project

Philippines-based FCF Minerals has been recognised for a community development project that focuses on out of school youth.

The project saw FCF, which is owned by UK-based Metals Exploration, take out the 2009 Asia Mining Congress Sustainability Award.

A judge of the awards, Kathryn McPhail, of the International Council of Mining and Metals (ICMM), said there were six companies short listed, most with very interesting contents in their submissions. “The winners were over the moon.”

FCF’s initiative focused on out of school youth (OSY) of Runruno, a village in the northern part of the Philippines . More News

COMPANY & PRODUCT NEWS - Innovative products from AMC

The Australian Mud Company (AMC), a drilling fluids and products company, has launched a number of products aimed at making the mining industry more sustainable with far less impact on the environment.

Recent releases include a range of ecologically sensitive bio-chemical products, known as Eco Nutria, which enable the in-situ treatment and remediation of petro hydrocarbons such as oil, diesel or polymers, from drilling rig sites. All products within the range are manufactured from natural materials and fibres, are biodegradable and environmentally friendly. More News

PRODUCT NEWS – The Airport Economist’s view of exports

There are many aspects to the Australian export industry with the work of successful Australians in evidence throughout the world.

In a new book titled ‘The Airport Economist’, Tim Harcourt, who is the chief economist of the Australian Trade Commission, proves that there is an export dimension to almost everything and that not all economics writing has to leave you high and dry.

For instance, did you know that Australia is helping Singapore 'be creative' to address its imbalance of ballet dancers to engineers and that there is a Transylvanian Cricket Club full of Aussies in Romania? Did you also know that Israeli youngsters are crazy for Tim Tams and the French are buying Billabong board shorts in Bordeaux on Bastille Day? More News