(UPDATE) New $465-M bid for miner Indophil trumps Xstrata


Posted at Jun 20 2008 06:59 PM | Updated as of Jun 21 2008 02:59 AM


SYDNEY - Competition for a giant undeveloped copper mine in the Philippines heated up on Friday, with Australia's Indophil Resources receiving a A$488 million ($465 million) bid that trumped a hostile one from Xstrata Plc.

At stake is ownership of a third of the Tampakan lode in the southern island of Mindanao, which if in production today would rank as one of the world's richest.

The new offer, from a consortium of investment groups Crosby Capital Ltd and the Alsons Group and Indophil Chief Executive Richard Laufmann, pushed Indophil's stock up as much as 20 percent to A$1.39, its highest price ever. It closed at A$1.385.

"This is a big deposit and, given the outlooks for copper and gold going forward, quite a prize for whoever gets to mine it," said Gavin Wendt, a mining analyst with Fat Prophets in Sydney.

"I wouldn't be surprised to see even higher offers coming from Xstrata or other interested parties," Wendt said.

Indophil, which co-owns the lode with Xstrata, advised shareholders to accept the latest offer unless a higher one came along.

The consortium is offering A$1.28 cash per Indophil share. Xstrata offered A$1 a share in May.

"The proposal vindicates the directors' consistently held view that the Xstrata offer is low-ball and grossly inadequate," Indophil Chairman Brian Phillips said in a statement.

Lion Selection Ltd is Indophil's largest shareholder with 25.4 percent. Last month it agreed to sell 17.8 percent to Xstrata. Lion's shareholders are due to vote on the sale to Xstrata on Monday.

Xstrata said it was is considering its options and would review its position after the Lion Selection meeting.

Xstrata has been buying copper, zinc and coal mines in Australia and nickel deposits in Canada and Africa as it builds up a diversified commodities powerhouse.

Xstrata is not alone. Miner BHP Billiton Ltd is offering $170 billion in its shares for rival Rio Tinto Ltd/Plc. BHP launched its offer shortly after Rio acquired Canadian aluminium group Alcan, paying $38 billion.

Xstrata already owns a big chunk of Tampakan after paying Indophil $41 million for a 62.5 percent stake. Indophil retained 34.2 percent, with a right to acquire a further 3.3 percent. The deposit holds 11.6 million tons of copper and 14.6 million ounces of gold, which geologists believe can be extracted at a cost that is a fraction of today's copper and gold prices.

Discovered in 1991, the mine has never left the drawing board, dogged by environmental and economic problems, political instability and laws restricting foreign ownership.

Last week, Philippines bishops asked provincial leaders to stop development of the mine, saying it would cause environmental damage and hurt the local farming and fishing industries, according to a June 15 report in the Manila Times.

Philippine President Arroyo ordered the military in February to create a special armed force to protect mines after communist rebels attacked Tampakan on New Year's Day.

Xstrata estimates it will be 2014 before the mine is running.

Indophil is being advised by Gresham Advisory Partners. Deutsche Bank is advising Xstrata. ($1=A$1.05)