Editorial: AA+AL=Alcoan?

With U.S. aluminum giant Alcoa launching a hostile takeover bid for Alcan, Canada’s largest mining company, on May 7, it wasn’t hard coming up with the top mining story of the week ended May 12, the 19th trading week of 2007.

* The deals in mining have gotten so big and audacious this decade that there’s a bit of a ho-hum feel about this one, especially with Alcoa stressing that little will change with Alcan’s current and planned operations, particularly in Canada.

Still, Alcoa’s mostly cash offer, originally tabled at about US$27 billlion or US$73.25 per Alcan share, if it were to be completed, would be the largest takeover in Canadian history, and create the biggest aluminum company in history.

The many anti-monopoly regulatory hurdles in Europe that bogged down Alcan’s previous takeovers of Algroup and Pechiney, and Inco’s failed merger with Falconbridge don’t seem to have fazed Alcoa management, who reckon they could complete the deal by year-end.

Many market players think otherwise, and have driven up Alcan’s shares above the bid, or up 31% on the week — putting to rest, for now, Alcan’s long-held status as one of Canada’s most undervalued mining companies.

Probably the one thing most people can agree on is that the final outcome of what’s been set in motion this week won’t look like the present-day bid, and that there are a few more surprises ahead — The very first surprise being that Alcoa’s shares actually rose significantly after the bid, along with Alcan’s.

* Newfoundland’s small mining industry got a boost this past week with the official opening of Aur Resources’ Duck Pond mine in the central part of the island, south of Millertown.

Originally discovered by Noranda in 1973, Aur bought the wholly owned copper-zinc-silver-gold asset from Thundermin Resources and Queenston Mining for $6 million in 2002.

The underground mine’s 6-year minimum life provides a great opportunity for any Newfoundlanders working as skilled tradespeople in somewhat bleak and expensive places like Fort McMurray, in Alberta’s oilsands, to come home to a steady, good-paying job.

* Kudos to Goldcorp CEO Ian Telfer, who donated $25 million to the University of Ottawa’s School of Management, where he earned an MBA in 1976.

So far, it’s the largest single gift to the university and the largest individual donation to a Canadian business school. The faculty will be renamed the Telfer School of Management, and it will be housed in a new building funded by a $15-million donation from businessman Paul Tellier.

Telfer has already been helping the faculty’s students with the Ian Telfer Scholarship for MBA students, which provides financial support to management students in need, and, for the past two years, he has hired a U of O MBA grad to work as his personal apprentice in Vancouver.

The university has so far raised more than $226 million in its latest push, the largest fundraising campaign ever in the Ottawa area.

* We tend to shy away from publishing rumours, but not when they’re big enough to roil the markets. On May 9, there was some buzz that the world’s largest mining company, BHP Billiton, was cooking up a takeover bid for rival giant Rio Tinto in what would be the industry’s largest-ever merger.

Rio Tinto’s ADRs surged as much as 20% on May 9 in New York while BHP Billiton’s shares jumped more than 5%. At presstime, no real deal had emerged, but the rumour had already created billions of market capitalization out of thin air.

* The Royal Canadian Mint in Ottawa has once again showed the world that it remains a global leader in gold refining and bullion-coin craftmanship with the introduction of a 100-kg, $1-million (face value) Maple Leaf gold coin that is an unprecedented 99.999% pure gold — up from the still impressive “four nine” purity level.

The coin will be officially unveiled May 16 at the New York Mercantile Exchange, as will a new series of 99.999%-pure 1-oz. Maple Leaf gold coins, which will be sold alongside the existing 99.99% pure Maple Leaf coins.

The mint launched the gold Maple Leaf line of 1-oz. coins in September 1979 at a 99.9% purity level, which was increased to 99.99% in 1982.