Eramet launches friendly bid for Weda Bay

Having failed to wrest control of the Koniambo ferronickel project in New Caledonia’s Northern province from partners Falconbridge (FAL.LV-T, FAL-N) and Socit Minire du Sud Pacifique (SMSP), Eramet is setting its sights on Weda Bay Minerals’ (WDA-T, WBMIF-O) Halmahera nickel-cobalt laterite deposit, on the like-named Indonesian island.

The French nickel and manganese miner has launched a friendly $2.70-a-share bid for Weda Bay. Weda’s board and institutional investors holding more than 40% of the company on a fully diluted basis have agreed to the $270-million deal. The deal includes a $10-million break fee payable by Weda Bay.

Eramet’s all-cash offer represents a 12.5% premium over Weda’s closing share price on the Toronto Stock Exchange on March 14 — the day before the deal’s announcement, and a 37% premium over the issue’s 3-month volume-weighted average share price.

The deal requires regulatory approval, and is subject to at least 75% of Weda’s shares being tendered.

Weda Bay’s flagship asset is a 90% interest in Halmahera, where measured and indicated resources total 155 million tonnes averaging 1.45% nickel and 0.09% cobalt. Another 123 million tonnes of inferred material runs 1.53% nickel and 0.08% cobalt. Indonesia’s Aneka Tambang owns the remaining 10%.

A prefeasibility study in early 2002 indicated the project could economically support the annual production of 60,200 tonnes nickel and 5,000 tonnes cobalt in an intermediate sulphide product for around 20 years. A scoping study of a slightly undersized process plant pegged capital costs at US$700 million.

Australia’s Aker Kvaerner is updating the study in anticipation of a definitive feasibility study (DFS). The revised study is due out early this year, with the DFS scheduled to begin by mid-year. Other work planned for the remainder of the year includes infill drilling and metallurgical testing of the Santa Monica deposit, an evaluation of storing tailings on land, and baseline environmental and social studies.

Late last year, Eramet asked Paris’ High Court of Justice to block the transfer of Koniambo, claiming that Falconbridge and SMSP had not honoured the terms of the project’s ownership transfer, namely the completion of a feasibility study and the placement of firm orders for at least US$100 million worth of equipment and services before Jan. 1, 2006. The court ruled otherwise.

Plans call for Koniambo to begin producing at 60,000 tonnes per year by 2009. The project centres on measured and indicated resources totalling 142.1 million tonnes running 2.13% nickel, based on a cutoff grade of 1.5% nickel. At a 2% cutoff, the resources amount to 75.6 million tonnes averaging 2.47% nickel.