Editorial: BHP Billiton pitches mega-bid

After a furious few months of mergers-and-acquisitions activity, the mining industry stopped to catch its breath during the week ended Dec. 15, the fiftieth trading week of 2007.

* But BHP Billiton is using the quiet time before the Christmas and New Year’s break to hit the streets of the world’s financial capitals and sell the merits of its blockbuster, semi-hostile bid for Rio Tinto, whose board still refuses to enter any discussions with the Anglo-Australian giant.

Offering Rio Tinto shareholders roughly a 15% takeover premium in shares, BHP Billiton management is now putting forward the argument that, since its creation in 2001, its team has been better at creating value than Rio Tinto’s managers. BHP notes that, since 2001, its market capitalization has grown at a compound annual growth of rate of 37% versus a measly 29% for Rio Tinto, and its production of copper equivalent has grown at a compound annual rate of 8% versus Rio Tinto’s 4%. All this has translated into superior annual growth rates for BHP Billiton shareholders in terms of both earnings growth and total shareholder returns.

As for future production growth, BHP is particularly keen on roughly doubling production at two of its cornerstone assets: the Cerro Matoso open-pit nickel mine in Colombia; and the Olympic Dam copper-uranium mine in Australia.

* Elsewhere on the M&A beat, Idaho-based Coeur d’Alene Mines is basking in the success of three sets of shareholder votes that have given the go-ahead to the three-way merger of Coeur, Palmarejo Silver and Gold, and Australian-based Bolnisi Gold, all under the Coeur banner.

The advanced Palmarejo silver-gold project should boost Coeur’s annual silver output by 30 million oz. by 2009, further entrenching the company’s status as one of the world’s leading silver miners.

* In less happy news, cash-crunched Tahera Diamond stumbled awkwardly by presenting a rights offering to the market that went against Toronto Stock Exchange rules. The TSX does not permit rights offerings to be conditional upon a minimum amount being raised — in this case, $30 million.

Tahera returned with a best-efforts offering of at least $40 million worth of units, and has convinced Tiffany & Co. and Nuna Logistics to accept Tahera shares in lieu of millions of dollars owed.

This will be the make-it-or-break-it winter for Tahera at its underground Jericho diamond mine, where it has so far cost about two dollars to mine a dollar’s worth of diamonds.

* How do you make up for low grades? Volume, volume, volume. At least that’s been the approach of a few Vancouver-based mine developers of late: Goldcorp has ratcheted up the planned mining rate at its already huge Penasquito polymetallic project in Mexico by a breathtaking 30% to 130,000 tonnes of ore per day; Hard Creek Nickel has just added a decade of mine life to its planned Turnagain nickel project near Dease Lake, B.C., where resources in all categories exceed 1 billion tonnes; and Sherwood Copper has tabled a prefeasibility study that significantly expands the scope of its proposed Minto copper-gold mine in the Yukon.

* In grassroots exploration news, the Ross Beaty-led junior Global Copper continued to impress with assays from another 10 holes — mostly stepout — drilled at its Relincho copper-molybdenum project in Chile. The best stepout hole, RG06-133, intersected 544 metres grading 0.7% copper and 0.084% molybdenum (or 1.2% copper equivalent) including 188 metres grading 1.07% copper and 0.167% molybdenum. A new resource estimate is expected soon.

* There was some encouraging news from Michigan’s Upper Peninsula, which is enjoying a bit of a mining renaissance, along with Minnesota. Michigan’s Department of Environmental Quality has approved a series of permits to Rio Tinto subsidiary Kennecott Eagle Minerals to start mining at its proposed Eagle nickel-copper mine near Marquette.

“This has been one of the most thorough reviews of an application ever done by this agency,” said DEQ Director Steven Chester in a statement. The project is the first to be subject to Michigan’s tough new Nonferrous Metallic Mineral Mining rules specifically designed to examine any potential environmental impacts from the mining of metallic sulphide ores.

The decision sets a nice precedent for juniors such as Aquila Resources, which is advancing its promising Back Forty polymetallic project, also in the U.P.

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