Industry’s M&A Wave Rolls On

Industry’s M&A Wave Rolls On

Merger and acquisition activity continued apace in the mining industry during the period of mid-February to mid-March 2007. Here are brief summaries of some of the action:

Xstrata Bids for LionOre: On March 26, 2007, Xstrata and LionOre Mining announced a friendly agreement whereby Xstrata would acquire LionOre for about $4 billion in cash. LionOre’s board of directors unanimously recommended the bid to LionOre shareholders. If the transaction closes, LionOre’s assets would be merged with those of Xstrata Nickel.
LionOre has nickel and gold mining operations in Australia, Botswana, and South Africa. The company expects to produce about 39,800 mt of attributable nickel in its 2007 fiscal year. Its nickel production is supported by significant byproduct credits from copper, cobalt, platinum group metals, and gold. LionOre also owns the proprietary Activox technology for the hydrometallurgical treatment of metal concentrates.
Xstrata Nickel manages nickel production totaling more than 110,000 mt/y of refined nickel. The company has five mines and processing facilities in Ontario and Quebec, Canada; a ferronickel mine and processing facility in Bonao, Dominican Republic; and a refinery in Kristiansand, Norway. Its development projects include Nickel Rim South in Canada, Kabanga in Tanzania, and Koniambo in New Caledonia.

Freeport Acquires Phelps Dodge: Freeport-McMoRan Copper & Gold announced on March 19, 2007, completion of its acquisition of Phelps Dodge (E&MJ, Dec. 2006, p. 14). Shareholders of both companies approved the transaction at special shareholders meetings held on March 15. At each meeting, approximately 98% of the votes cast supported the transaction.
Three former directors of Phelps Dodge were elected to the Freeport board of directors: General Charles C. Krulak, Jon C. Madonna, and Dustan E. McCoy. As previously announced, Freeport Chairman James R. Moffett and Freeport CEO Richard C. Adkerson will retain those positions in the combined company, and former Phelps Dodge COO Timothy R. Snider will be COO of the combined company.

Kinross Gold Acquires Bema Gold: On Feb. 27, 2007, Kinross Gold announced completion of its acquisition of Bema Gold. Plans for the transaction were initially announced on Nov. 6, 2006 (E&MJ, Nov. 2006, p. 5). At a meeting of Bema shareholders on Jan. 30, 2007, the transaction was approved by 91% of the votes cast, representing 59% of Bema’s outstanding shares.

Lihir Gold Merges with Ballarat Goldfields: On Feb. 23, 2007, the Supreme Court of Victoria, Australia, approved the Scheme of Arrangement relating to the merger of Lihir Gold and Ballarat Goldfields (E&MJ, Nov. 2006, p. 20). The merger became fully effective on March 9.

Cliffs Buys into Amapá: Cleveland- Cliffs completed its acquisition of a 30% interest in the Amapá iron ore project in Brazil in early March 2007. MMX Mineração e Metálicos holds the remaining 70% and will be the operator. Cliffs will provide technical support for project construction and operation. Cliffs paid $133 million for its 30% interest and financed the purchase with cash on hand.
The Amapá project is located in northern Brazil and includes a 370-million-mt iron ore deposit, a 192-km railway, and 71 hectares of land on the banks of the Amazon river available for the development of an iron ore terminal. Production is scheduled to begin before yearend 2007. The project will produce 6.5 million mt/y of iron ore concentrate for sale under a longterm supply agreement to Gulf Industrial Investment Co., owner-operator of an iron oxide pelletizing plant in Bahrain.

Zinifex Bidding for Wolfden: On Feb. 19, 2006, Australia-based Zinifex made a non-binding proposal to acquire all the outstanding common shares of Wolfden Resources for C$3.90 cash per share. Wolfden is a Canada-based mineral exploration and development company with advanced-stage projects in Nunavut, including the high-grade Izok and High Lake poly-metallic deposits. Zinifex’s initial proposal valued Wolfden at about C$358 million. Wolfden granted Zinifex a period of exclusivity until March 7, 2007, in which to complete due diligence.
On March 8, the companies announced that the offer had been reduced to C$3.81 per share and the period of exclusivity had been extended to March 16. On March 19, Zinifex announced that a takeover- bid circular based on the March 8 announcement would be mailed to Wolfden shareholders on or before April 2; that the offer would be open for not less than 36 days; that the offer was conditional on the tendering of 66 2/3% of Wolfden shares; and that the Wolfden board of directors was recommending acceptance of the offer.
And, on Feb. 28, 2007, Zinifex and Umicore received European Commission approval for the proposed merger of their zinc smelting and alloying assets, initially announced on Dec. 12, 2006 (E&MJ, Jan.-Feb. 2007, p. 4). The companies were continuing to work to complete final due diligence and structuring discussions with a view to signing a binding business combination and shareholders’ agreement by the end of the first quarter of 2007.

Goldcorp Selling Peak and Amapari: On Feb. 19, 2007, Goldcorp announced the signing a letter of intent to sell its Peak mine in Australia and its Amapari mine in Brazil to GPJ Ventures, a Vancouver company, which will change its name to Peak Gold Ltd. Under the terms of the agreement, Goldcorp will receive from Peak Gold $200 million in cash and $100 million payable through the issuance of Peak Gold common shares. Upon completion of the sale, Goldcorp will own approximately 24% of Peak Gold.
Julio Carvalho, previously Goldcorp’s executive VP-South America, will become CEO of Peak Gold. U.S.

Gold Acquires Three Nevada Juniors: U.S. Gold shareholders, by a vote of more than 99% of the shares cast at a special meeting held on March 15, 2007, approved resolutions for U.S. Gold to acquire White Knight Resources, Nevada Pacific Gold, and Tone Resources. Each of the three companies holds exploration property near or adjoining U.S. Gold’s Tonkin Springs property on the Cortez trend in western Nevada. U.S. Gold initially announced plans to consolidate the properties through acquisition of the companies in early March 2006.
The boards of directors of each of those three companies supported U.S. Gold’s acquisition proposal, and on March 23, U.S. Gold reported that shareholders of each of the companies had overwhelmingly accepted its offers. As of that date, U.S. Gold held 93.7% of the shares of White Knight Resources, 83.5% of the shares of Nevada Pacific Gold, and 89.4% of Tone Resources.