Jinchuan trumps rival in C$214m deal for Tyler

PUBLISHED : Tuesday, 08 January, 2008, 12:00am
UPDATED : Tuesday, 08 January, 2008, 12:00am

Jinchuan Group, the mainland's largest producer of nickel, cobalt and platinum and a major copper producer, has clinched a deal to buy Canada's Tyler Resources for C$214 million (HK$1.66 billion) as part of the nation's effort to secure long-term metal supplies.

Its all-cash offer would thwart rival Canadian bidder Mercator Minerals' hostile all-shares bid to gain control of Tyler, a Toronto-listed firm with a mining project in Mexico.

State-owned Jinchuan, an unlisted company based in Gansu province, has offered to buy Tyler shares at C$1.60 each, a 60 per cent premium to Tyler's closing price before the deal's announcement.

It is also 54 per cent higher than Mercator's offer based on the latter's closing price on Friday. Mercator in October offered to pay 0.113 of a Mercator share for each Tyler share.

Tyler chairman Alan Craven said that in response to the hostile bid, the board invited other bidders to join the fray. Jinchuan came up with the best offer, which received the board's unanimous support, he said.

Tyler has been developing the Bahuerachi mine that it said was Mexico's fourth-largest deposit of base and precious metals including copper, molybdenum, zinc, gold and silver. As it is still in the early stages of development, no proved reserve figure was available.

This deal, subject to approval by at least 66 per cent of Tyler's shareholders, is Jinchuan's latest in a string of overseas deals. If rejected, Tyler will have to pay a termination fee to Jinchuan of C$7.27 million.

Jinchuan in March last year agreed to buy a 13 per cent stake in Australian nickel miner Metals X for A$32.8 million (HK$223.68 million). It has also entered into exploration and production deals in Russia and Congo.

Jinchuan said in October that it had an annual production capacity of 150,000 tonnes of nickel, 400,000 tonnes of copper, 10,000 tonnes of cobalt, eight tonnes of gold and 150 tonnes of silver.

Although nickel, zinc and copper prices have fallen markedly in recent months amid a rising global inventory, some analysts said mainland miners were unlikely to be discouraged from buying overseas resources.

'The No1 strategic priority for Chinese miners is to enhance national metals supply security,' said DBS Vickers analyst Helen Wang. 'They still have a long way to go.'

Jinchuan, which accounted for 90 per cent of the mainland's refined nickel output, said it expected last year's pre-tax profit to have risen 38.9 per cent to at least 10 billion yuan.

Digging deep

Jinchuan has been expanding its overseas reach in a string of deals

The pre-tax profit the diversified miner expects to post for last year, in yuan: 10b yuan