Jinchuan may fight Zinifex bid for Allegiance

PUBLISHED : Saturday, 12 January, 2008, 12:00am
UPDATED : Saturday, 12 January, 2008, 12:00am

Jinchuan Group, a state-owned mining firm expanding overseas through acquisitions, has urged its Australian partner to reject a hostile takeover offer, in a move analysts that say shows it may make a counter-bid.

Asia's top nickel producer yesterday said Zinifex's A$775 million (HK$5.4 billion) cash hostile bid for Sydney-listed Allegiance 'does not reflect the true value of the company'.

Allegiance plans to start production early this year at its Avery nickel mine in Tasmania, in which Jinchuan has an agreement covering all metalliferous discoveries to be made.

'With its near-term production profile and [the mine being in] a highly prospective nickel province, the vast majority of which remains unexplored, Jinchuan believes there is significant further upside in Allegiance,' Jinchuan chairman Li Yongjun said in a filing with the Australian Stock Exchange by Allegiance.

Melbourne-based Zinifex, the world's No3 zinc producer, offered 90 Australian cents for each share of Allegiance on December 17 and promised to raise the bid to A$1 should it gain more than 30 per cent or approval by the Allegiance board.

However, Allegiance has advised its shareholders to reject the offer.

Shares of Allegiance rose 0.96 per cent to A$1.05 yesterday, valuing the company at A$814 million. The stock has risen 48 per cent since the bid.

'Chinese companies are now more proactive in seeking overseas acquisitions amid China's surging demand for resources and the growing financial strength of Chinese companies,' said Xie Shusheng, head of State Key Laboratory at the General Research Institute for Non-ferrous Metals in Beijing.

'It won't surprise me if Chinese companies, including Jinchuan, make a counter-bid.'

No Jinchuan spokesman could be reached for comment.

Jinchuan on Monday offered C$214 million (HK$1.65 billion) cash for Canada's Tyler Resources that would thwart rival Canadian bidder Mercator Minerals' hostile all-share bid.

The company also has stakes in other Sydney-listed firms including Albidon and Metals X, and it is awaiting government approval for a purchase of an 11 per cent stake in another Australian firm, Fox Resources, for A$17.9 million.

Last month, Sinosteel Corp, the mainland's second-largest iron ore trader, announced a A$1.2 billion cash counter-bid for Australian iron ore miner Midwest Corp after a rival offered an all-stock hostile bid.

Analysts said Jinchuan's planned 30 billion yuan Shanghai initial public offering later this year could further build up its war chest for overseas acquisitions and capacity expansion.