Chinalco in C$840m bid for Peru Copper

PUBLISHED : Tuesday, 12 June, 2007, 12:00am
UPDATED : Tuesday, 12 June, 2007, 12:00am

Deal allows firm to complete diversification

Peru Copper has agreed to an C$840 million (HK$6.18 billion) cash takeover offer by Chinalco, the parent of Hong Kong-listed Aluminum Corp of China (Chalco), according to the Canadian company.

The deal, the latest attempt by a mainland resource firm to gain control of reserves overseas, will allow Chinalco, the world's second-largest producer of the key aluminium ingredient, alumina, to complete its diversification into upstream copper mining, having bought several mainland copper smelting and processing companies.

In what Peru Copper described yesterday as a 'friendly takeover bid', Chinalco offered C$6.60 in cash for each share of the Vancouver-based company.

The offer represents a 21 per cent premium to the shares' 20-day weighted average of C$5.45 on the Toronto Stock Exchange before May 23, the stock's last trading day.

Formed in February 2004, Peru Copper owns mineral concessions in the Toromocho mining project in Morococha in central Peru, about 4,800 metres above sea level in the Central Andes Mountains.

Peru is the world's third-largest copper producer.

The mainland is the world's largest consumer of the metal and imports more than 60 per cent of its requirements for copper concentrate, the raw material for copper smelting.

Peru Copper has an option to acquire 47 mining concessions in Toromocho and related assets from state-owned mining firm Empresa Minera del Centro del Peru.

The company has reportedly said the project, which is in the exploration and pre-production stage, could become one of the biggest mines in Peru by 2010, producing some 300,000 tonnes of refined copper a year for 33 years.

Peru Copper posted a net loss of C$1.32 million in the first quarter this year following a loss of C$3.3 million last year and C$3.4 million in 2005.

To ensure sufficient funding for the project, Chinalco has agreed to buy 13.2 million new Peru Copper shares, 9.9 per cent of its enlarged share capital, at C$5.30 each for a total of C$70 million, regardless of whether its buyout offer is accepted or not.

The company's board of directors has unanimously recommended the deal, Peru Copper said.

The offer, which will be open for at least 35 days, has to gain the approval of at least two-thirds of Peru Copper's shareholders.

Chinalco, the country's largest aluminium smelter whose biggest asset is a 40.46 per cent stake in Chalco, has diversified into copper, rare metals and other non-ferrous metals exploration and processing.

Earlier this month, it spent 560 million yuan to buy a 44.15 per cent stake in Shanghai Copper Industry, which produces copper plates, strips, alloy wires and foils.

The company has agreed to inject another 1.1 billion yuan to raise the latter's copper plates and strips production capacity to 120,000 tonnes a year from 50,000 tonnes.

It also bought copper smelter Hubei Daye Non-ferrous Metals in 2004 and copper processor Luoyang Copper Industry in 2005.

Peru Copper is allowed to accept a superior proposal from a third party but Chinalco will have five days to match any counter offer.

Buying overseas

Peru Copper was formed in February 2004

Height above sea level in the Central Andes Mountains of the Toromocho mining project in Morococha in central Peru 4,800m