Editorial: Teck finesses another takeover

It was yet another period of intense merger and acquisition activity in the mining sector during the week ended July 7, the 27th trading week of 2007 and the beginning of the third quarter.

* The headline grabber, of course, was Teck Cominco’s announcement on July 3 of a friendly, $41-per-share takeover offer for copper miner Aur Resources. This deal is generous and looks like a perfect fit of high-quality assets and management styles. It should be a relatively smooth transition, especially since Teck had sold Aur a big stake of the Quebrada Blanca mine in Chile just a few years ago. The market doesn’t expect any rival bidders to emerge, judging by the subsequent flatlining of Aur’s stock price to just below the bid.

* Further down the corporate food chain, Central African Mining & Exploration has apparently stepped up its odd bid for Art Ditto and Bob Buchan’s Katanga Mining, stating that it intends to make an all-share bid for Katanga, in which it already holds a 22% interest. This “indicative” bid is 15 shares for one Katanga share, or about $21 per share for Katanga, which would value the company at $1.6 billion. Katanga’s shares popped up $4 above the bid, signalling that this thing is far from over.

* In Brazil, the Ken Johnson-led emerging diamond producer Vaaldiam Resources has taken on the role of junior consolidator with a proposed merger with Australia’s Elkedra Diamonds, also a producer in Brazil, and Great Western Diamonds. In a part of the world that’s characterized by mom-and-pop, alluvial diamond mining, this new entity would be on track to become South America’s largest diamond producer.

* Across the South Atlantic, BRC Diamond and Diamond Core Resources struck a deal to merge pretty much as equals and form a new Africa-focused diamond explorer named BRC DiamondCore that will be dual-listed in Canada and South Africa.

* A short-term hiccup or a sign of a seriously overbought market? For the first time in four years, uranium spot prices have started to decline, though only by two bucks to US$133 per lb. U3O8. It’s also the first time since May 2001 that uranium prices have declined two weeks in a row.

Uranium market consulting firm UxC is recommending caution in that utilities have lined up enough uranium to last for the rest of the year and need little more from the spot market in the first half of next year. Raymond James analyst Bart Jaworski expects continued weakness in uranium equities during the summer, and foresees “significant uranium price declines” starting next year, gradually dropping to US$50 per lb. U3O8 by 2012.

On the other hand, stockinterview.com has pointed out that the Tuareg and other nomadic tribes in Niger have stepped up attacks on uranium mines and related infrastructure in the country, which accounts for 8% of the world’s uranium production. The insurgents are particularly upset with the growing presence of the Chinese in the country’s uranium sector, and recently kidnapped Zhang GuoHua, the deputy general manager of China Nuclear International Uranium, near the oasis of Indall, which is both prospective for uranium and a good grazing spot for the Tuareg’s livestock.

* In Esquimalt, B.C., Prime Minister Stephen Harper unveiled the government’s plan to spend more than $3 billion building up to eight Polar Class 5 arctic offshore patrol ships and establishing a deep-water port in Canada’s Far North. The ships will be able to patrol the length of the Northwest Passage during the summer and its approaches year-round.

Said Harper: “More and more, as global commerce routes chart a path to Canada’s North and as the oil, gas and minerals of this frontier become more valuable, northern resource development will grow ever more critical to our country.”

* Perhaps we should start a section in the paper devoted to praising huge charitable donations: Just a couple of weeks after Vancouver mining financier Frank Giustra and Mexican billionaire Carlos Slim pledged US$100-million apiece to Bill Clinton’s Third World development charity, Vancouver’s Lundin Group has chipped in another US$100 million. Through its “Lundin for Africa” charity, the Lundin Group is already involved in significant aid work in five African countries.

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