Editor’s Picks: Deal-Making Aplenty

The most significant mining event of the fifteenth trading week of 2007 was very good news, even if the announcement was brief.

* Ivanhoe Mines and partner Rio Tinto reached a preliminary investment agreement on April 10 with the Mongolian government to develop the giant Oyu Tolgoi copper-gold project in the South Gobi region.

More details have not been forthcoming, but Ivanhoe says the draft agreement remains subject to review and approval by the cabinet and national parliament, as well as both companies’ boards.

Our theory is that a deal between the companies and the Mongolian government became far more likely after the huge Prospectors and Developers Association of Canada convention in Toronto in early March. There, the Mongolian delegation would have better realized that Mongolia was a small player in a very competitive world, and that the mining sectors of many other jurisdictions — including Canada — are thriving with sensible, free-market mining policies.

Indeed, along with other Mongolia-focused stocks, Ivanhoe’s stock started to move upwards significantly during the PDAC convention, resulting in only a modest rise following the recent watershed announcement.

* Lundin Mining is continuing to impress with its drive to grow into a major mining company under the guiding hand of the next Lundin generation. This week, fresh from its friendly offer for Rio Narcea Gold Mines, Lundin unveiled another friendly deal: a merger with its cousin, Tenke Mining.

Tenke brings with it, of course, its stake in the gigantic, high-grade Tenke Fungurume copper-cobalt asset in the Democratic Republic of the Congo, a joint venture with Phelps Dodge and the DRC government. Under the proposal, existing Lundin Mining and Tenke shareholders will own 73% and 27%, respectively, of the new Lundin Mining.

* Another largish deal was Barrick Gold’s purchase from financially troubled Emperor Mines of another 20% of the Porgera gold mine in Papua New Guinea for US$250 million in cash plus an adjustment amount.

Barrick is adding to its existing 75% interest picked up via its Placer Dome acquisition last year. Porgera produced 542,000 oz. gold in 2006 and hosts 9.4 million oz. gold in reserves.

Emperor is 78%-owned by DRDGold, which was formed in 2005 from a hodgepodge of lesser-quality gold assets located mostly in South Africa. This Porgera deal will clean up Emperor’s books and leave it with a US$130-million surplus.

Just last month, Emperor unloaded its shuttered Vatukoula gold mine in Fiji for US$1 (and the assumption of liabilities) to junior Westech Gold, which intends to raise several million pounds in London and Hong Kong and restart operations at the mine.

Emperor has thus brought to an end its 71-year history of mining in Fiji, and now owns only the small Tolukuma gold mine in Papua New Guinea.

* The uranium subsector proved to be lively again this past week, with a last-minute rival bid emerging from Central African Mining & Exploration Co. for Australia’s OmegaCorp.

CAMEC is offering one share for every OmegaCorp share, valuing OmegaCorp shares at A$1.44 apiece — a hefty premium to the A$1.15 offer from Canada’s Denison Mines, which expired on April 13.

On April 12, Paladin Resources bumped up its hostile offer for Summit Resources to one Paladin share for every 1.67 Summit Resources shares, up from 2.04 Summit shares.

Summit’s board has unanimously recommended that shareholders tender to the new offer, in contrast to their rancorous rejection of the previous one (as detailed in our accompanying feature section, which went to press prior to the revised bid).

* On the newly trendy moly front, some revealing number crunching from Northern Securities mining analyst Jeremy Link shows a substantial amount of insider selling over the past 12 months among Canadian-listed molybdenum-focused juniors.

Among the top 15 juniors over the last 12 months, Link tallied $1.7 million in insider buying and $38.9 million in insider selling. The selling was led by insiders of Blue Pearl Mining, Roca Mines, and Adanac Molybdenum.