Peabody, ArcelorMittal in bid for Australia Miner
US firm Peabody Energy and Europe’s ArcelorMittal steel company said Thursday their hostile Aus$4.7 billion ($4.9 billion, 3.4 billion euro) bid for Australia’s Macarthur had formally opened.
“Peabody and ArcelorMittal urge all Macarthur shareholders to accept the compelling offer to receive a substantial premium for their investment,” they said in a joint statement.
Jointly vying for Macarthur under the banner PEAMCoal, Peabody and ArcelorMittal launched a hostile bid of Aus$15.50 per share on August 1 after the world’s largest miner of pulverised coking coal used as a low-cost input in steel making refused to back their initial friendly offer.
Macarthur’s management urged shareholders yesterday not to accept the offer until it is able to review a revised bidder’s statement to be issued following their talks with PEAMCoal, the investment vehicle being used by Peabody Energy and ArcelorMittal.
PEAMCoal is 60 percent owned by Peabody and 40 percent by ArcelorMittal.
ArcelorMittal and Peabody Energy said a bidder’s statement would be sent to Macarthur shareholders today.
Macarthur’s shares were trading Thursday at around the Aus$15.50 per share offer price.
ArcelorMittal and Peabody Energy said current Macarthur shareholders would be entitled to retain dividends paid for the company’s financial year that ended on June 30 up to 16 cents, making their offer worth up to Aus$15.66 per share.
“Macarthur shareholders now have a clear opportunity to accept the PEAMCoal offer at a price that gives full credit to the state of Macarthur’s current operations and development projects,” Peabody Energy chief executive Gregory Boyce said in a statement.
They said the offer represents a 41 percent gain over the Aus$11.08 price of Macarthur’s shares on July 11, the day Peabody and ArcelorMittal’s approach was disclosed to the market.
BHP Billiton to Acquire HWE Mining Subsidiaries
BHP Billiton has signed a Heads of Agreement with Leighton Holdings to acquire the HWE Mining subsidiaries that provide contract mining services to its Western Australia Iron Ore operations. The Heads of Agreement relates to the mining equipment, people and related assets that service the Area C, Yandi and Orebody 23/25 operations. These operations collectively account for almost 70 per cent of Western Australia Iron Ore’s total material movement. The purchase price is US$735 million (A$705 million), subject to working capital adjustments.
BHP Billiton President Iron Ore, Ian Ashby said: “While this move to an owner-operator model will remove a layer of complexity and costs from our business, the real focus of this proposed transaction is the work force. Transitioning to owner operator in this way, rather than by replacing contractors through direct recruitment, is a lower risk strategy as it would be challenging to replace the highly skilled and long serving HWE employees in the current environment.”
The proposed acquisition is consistent with BHP Billiton’s previously stated intention to move the Western Australia Iron Ore business from contract mining to owner-operator mining. Subject to due diligence, definitive agreements and relevant internal and regulatory approvals, the transaction is expected to close during the fourth quarter of calendar year 2011.
Foreign Mining Investment in China Tops $175 billion
Intierra Resource Intelligence has released updated figures on foreign mining investment levels in China. The Intierra mining database identified that more than 60 companies with primary listings outside of China and Hong Kong have a direct market interest in quoted mineral resources in China. Foreign investments make up approximately $175 billion worth of total Chinese resources at today’s commodity prices. Intierra’s Managing Director, Peter Rossdeutscher, said: “Foreign investment in the Chinese mining sector is an evolving practice. Today, the major foreign investments are in phosphate, gold, coal and silver, but over time as more outside money flows into the market, those commodity rankings will likely alter.”
Companies listed on the TSX/TSX-V have $121 billion worth of quoted mineral resources in China, of which the TSX-V market attracts $14 billion. TSX-listed Spur Ventures for example, owns 80% of the 75 Mt Yichang phosphate project in the Hubei Province, which is scheduled to come online in 2013.
Companies listed in the US invested approximately $21 billion. US-listed coal companies are very active in production, with current output of over 2.2 Mt/y from Chinese operations. Some of these companies include SGB International (Quanzhou City), U.S. China Mining Group (California), China Energy Corporation (Hohhot City) and China Natural Resources (Hong Kong).
Australian company Dragon Mountain Gold is one of the most active ASX companies in China, with an 87% interest in the 4.3 Moz Lixian Gold Project, where mineralisation remains open at depths beyond 250 m. Whilst London-listed Griffin Mining has a 60% interest in the Caijiang zinc/gold mine, which made the company a profit after tax of $8.8 million in 2010.
Rossdeutscher summarised the ongoing opportunity for foreign firms: “Naturally there are challenges for exploration and mining companies looking to invest in China, but the potential investment rewards for those who get it right can be significant.”
Gold Price Hits Parity With Platinum For First Time Since 2008
The price of gold Monday soared to new record highs and reached parity with sister metal platinum for the first time since the end of 2008.
Spot gold leveled with the complex’s most expensive metal as it rallied to an all-time best of $1,715.29 a troy ounce on Standard & Poor’s downgrade of the U.S. government’s debt rating, which amplified investor jitters over the global economic outlook. Spot platinum, for its part, briefly fell as low as $1,703/oz, as fears over demand for the industry-linked metal kept the market under pressure.
The gold-to-platinum ratio, which measures how many gold ounces are needed to buy an ounce of platinum, has been sliding sharply as the price of gold benefits from economic turmoil, particularly in the U.S. and the euro zone. At the start of July the ratio stood at 1.15:1, compared with 1.24:1 at the start of the year.
While a ratio at or near 1:1 is seen as a good buying opportunity for platinum–demand for which could potentially drive the price higher and widen the ratio once again–analysts say the metals are likely to hold near parity in the near term as gold continues to benefit from global economic uncertainty.
“I can’t see any reason for a reversal of this situation while Italy and Spain are vulnerable and there is the chance that other agencies will downgrade the U.S. Everybody is selling out of risk and the macro issues that are supporting gold remain,” said Societe Generale metals analyst David Wilson.
Platinum and gold, both used widely by the jewelry industry, are the two most expensive traded precious metals, and are significantly more expensive than sister metals palladium and, in particular, silver.
Investors closely watch ratios between the precious metals, often examining shifts before deciding which metal represents the better investment. Some traders also play the fluctuating price differentials between the pair.
“On a historical basis, the ratio looks cheap, [and] if we were prepared to buy the ratio now and hold it for a year or two, it would probably be a good trade, given that platinum’s fundamentals signal a lot more tightness over the medium term. But as investors struggle to make money in the short term, positioning for the medium term is in short supply,” UBS analyst Edel Tully said in a recent research note.
Over the past 20 years, the spot price of gold has rarely overtaken platinum. The lowest the ratio has fallen during that period was 0.93:1 in October 1992.
The last time the metals reached parity was in December 2008 as the price of platinum sunk amid the global financial crisis and a collapse in auto demand.
Mitsui analyst David Jollie said the closer price levels now held by the pair will “be interesting for the jewelry industry in particular, where there is some competition between gold and platinum.”
“We could, in China for example, see strong demand for platinum–often perceived as the more valuable metal–in the short term in response.”
Essar to Invest $4 bn in Zimbabwe Ventures
Joining the list of Indian business groups making huge investments abroad, Essar Africa Holdings Ltd (EAHL) of the Essar Group on Wednesday said it plans to invest around $4 billion to set up two companies — NewZim Steel Pvt Ltd and NewZim Minerals Pvt Ltd — in Zimbabwe.
EAHL’s investment is likely to be in two phases, with the first one pegged at $750 million, that will see the company acquiring 60 per cent stake in the newly formed New ZimSteel (NZS), while the remaining 40 per cent will be owned by the Government of Zimbabwe (GoZ).
Of late, India Inc has been investing more overseas than in the domestic market, leading to higher foreign direct investment (FDI) outflow than inflow.
EAHL will also hold 80 per cent stake in NewZim Minerals (NZM), while the rest will be held by the Government of Zimbabwe.
The newly formed entity will acquire 100 per cent stake in Buchwa Iron Mining Company (BIMCO) from Zimbabwe Iron and Steel Company (ZISCO) and will develop the latter’s mining assets, limestone deposits and the Mwanesi Iron Ore Deposit. The company will invest $100 million in the first 18 months in a technology assessment and testing programme, and will provide an additional funding of $3.5 billion for the construction of a large-scale beneficiation project and related infrastructure in Zimbabwe.
Zimbabwean minister of industry and commerce, Welshman Ncube, said, “We are pleased with the selection of Essar as a partner because of its commitment to the project and its track record in establishing steel facilities, its experience in infrastructure development and the successful undertaking of large capital intensive projects.”
$200 million Zinc Project : South Africa
Incorporated in 2007 and based in Johannesburg, Minero Mining Company, the company behind the project, is a 52% black-owned holding company with a 76.1% interest in Minero Zinc. The other shareholders are Metmar Limited ( 19.91%), DRA Mineral Projects (0.4%) and Umbono Capital Partners (3.55%).The Chief Executive Officer of the company is Kevin van Wouw.
Minero has identified an opportunity to introduce new, low-cost domestic zinc supply to plug the supply gap between current 90,000 tpa and the future 150,000 tpa. As an important replacement project, and in the view of the forecast increase in the SADC consumption, the Minero Mining Company is certain there is a lot of sense in what it is proposing to do. Minero’s zinc opportunity is centred on the Pering mine, situated about 70 kilometres south-west of Vryburg, in the North West province, which was shut down BHP Billitor in 2002.Minero Zinc exercised the option to purchase the issued shares in Pering Mine (Pty)Limited , which holds the rights to the Pering Mine , Irom Pering Mine Services Holdings (Pty) Limited , a subsidiary of BHP BIlliton.
A feasibility study on the orebody ,using previous exploratory drill holerecords in conjuction with our own twin drilling programme to verirify theprevious records, there is satisfaction that that the orebody can be minedeconomically.The modelling of the orebody – shows a resource of 448 Million tones at C37% zinc and 0.1 % in measured, indicated and inferred categories – was shown with 80% comprising the measured and indicated categories. At the current zinc price US$0.6 a pound, the proven and probable mining reserve is 42.6 trillion tons at the grade of 1.21 % zinc and 0.3% lead. During the period that the orebody feasibility study was conducted a parallel study was implemented to evaluate the size and cost of process plant required,
DRA Mineral Project was briefing to design and cost a treatment plant that could process 5.04 mpta of run-of-mine ore. This was later modified to the extent that the treatment rate should be developed in two phases; namely an initial treatment rate of 1.86 mpta; and extension of the facility after 3 years to treat 5.04 mpta.The Phase 1 Interim plant will commence operations processing the existing rock dumpsand the once the pit dumps dewatered and the mining commences, the plant would come into operations.
Metmar Limited a company which locuses in commodity trading, finance and logisticsfacilitation, has suscribed for 20% of Minero Zinc for ZAR 80 million which is the basis of the funding so far, together with ZAR 20 Million injected by the founders. Funding required to the first phase of the project to treat 1.86 mtpa has been estimated at ZAR 800 million. The interim plant capital is budgeted at ZAR 610 million, and the balance is required to cover the cost of establishing mine infrastructure; earthmoving; workshops; tailings and slimes dam facilities; and to provide suitable access road and start-up capital, of which ZAR 50 million has been spent.
The plan is that process plant would be commissioned by early 2012 to produce 28 000 tpa and 4000 tpa of lead by the middle of the second quarter of that year.As an anchor project for Minero, the Pering mine represents an opportunity to establish a zinc processing foothold in Southern Africa, from which to develop the strategy of an integrated zinc company.Southern Africa is highly prospective for zinc and lead mineralization, and Minero’s strategy to consolidate existing operations and processing facilities to grow the company into a primary zinc producer could have significant merit.
Trans Allied Resources, London, United Kingdom
Tel: 44 7727 927 454
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