MONTREAL – A major Chinese metals company that struck out twice in previous attempts to buy Canadian-based miners has reached a US$1.3-billion deal to acquire a TSX-listed copper producer with a key mine in Africa.
Minmetals Resources said Friday the deal to acquire Anvil Mining Ltd. (TSX:AVM) which has offices in Montreal, will help it significantly boost its copper production.
“It expands our copper output by about 60 per cent,” Minmetals Resources CEO Andrew Michelmore told analysts on Friday.
Copper is a major industrial metal in great demand as China rapidly grows its economic infrastructure – roads, bridges, office buildings and factories. It’s also a key item in everyday consumer items such as fridges, electrical and electronic equipment and is used in building and construction.
For Minmetals, the friendly agreement comes after failures to finalize other Canadian acquisitions.
Earlier this year, Minmetals lost out to Barrick Gold Corp. (TSX:ABX), the Toronto-based gold giant that paid C$7.3 billion and outbid the Chinese company for Vancouver-based copper producer Equinox Resources.
In 2004, Minmetals was in talks to buy former resources giant Noranda Inc., but the negotiations collapsed over the price the company was willing to pay and concerns that such an agreement might not be approved by regulators.
Noranda was later combined with Falconbridge, a Toronto-based nickel and copper company that was eventually bought by Xstrata, a European mining giant.
In the Friday conference call, Michelmore said the Anvil deal will increase the company’s base metal production in Africa as well as raise its international profile.
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“It’s an excellent strategic fit with our aim of building an international upstream base metals company,” Michelmore said, adding the mine expected to produce 60,000 tonnes of copper yearly.
“Anvil provides an excellent platform and experience to further expand our central African copper build.”
Michelmore said Minmetals is at ease with the political climate in Democratic Republic of Congo, which has been beset by internal political strife and violence.
“We are comfortable with the Democratic Republic of Congo in terms of political risk,” he said. “We also have very strong links with China into the DRC.”
Anvil Mining Ltd. (TSX:AVM) – which had put itself up for sale in a strategic review – is headquartered in Australia, with offices in Montreal, South Africa and Democratic Republic of Congo.
Michelmore said the takeover deal isn’t expected to need Canadian regulatory approval, but will require government approval from Australia and the Democratic Republic of Congo, where Anvil’s main copper property is located.
Minmetals has ore bodies in northern Canada as well as assets in Australia and in Laos, he said.
“Within those portfolios, we believe it actually fits very well and expands our geographic spread.”
Shares in Anvil jumped 32 per cent Friday in the first trading since the deal was announced. Anvil shares were trading at $7.64, up $1.87, in afternoon trading Friday on the Toronto Stock Exchange.
The Minmetals offer of $8 per share cash is a 38 per cent premium to Anvil’s market price of $5.79 at the end of trading Thursday, prior to the announcement.
Under the transaction, Minmetals will have the right to match any unsolicited superior offer made to Anvil and could receive a break fee of $53 million if the acquisition isn’t completed in some circumstances.
The Hong Kong-listed company that has its management team based in Australia, has also agreed to pay a $20-million fee to Anvil if the deal is rejected by Minmetals shareholders.
Its majority shareholder is China Minmetals Nonferrous Co., Ltd., part of the China Minmetals group, which has its headquarters in Beijing and 168,000 employees worldwide.
The transaction is part of a growing trend that has seen Chinese companies use their rich cash reserves to acquire oilsands, mining and other resources companies in Canada and around the world.
Earlier Friday, North Atlantic Potash Inc. sold eight of its exploration areas in Saskatchewan to a Chinese company – Yancoal Canada Resources Co. Ltd. – China for $110 million.
In the last two years, Chinese companies have bought a 20 per cent stake in Vancouver-based Teck Resources (TSX:TCK.B), Canada’s largest publicly traded miner, as well as expanded in the oilsands sector of Northern Alberta.
Chinese companies have also helped finance iron ore exploration in northern Quebec and other metals projects in the rest of Canada.
China has been stockpiling minerals, metals, cement, coal and other resources for years to help feed the Asian country’s rapidly growing infrastructure needs.
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