Palabora copper
Johannesburg, South Africa — 12 December 2012 – A consortium consisting of the governments of South Africa and China has tabled a bid of R5.31 billion (US$612 million) for JSE-listed Palabora Mining Company (Palamin) “’ South Africa’s only producer of refined copper.

Miningmx reports that the offer is equal to R110 per Palamin share “’ a 17% premium to Palamin’s close on 10 December.

Sellers Rio Tinto and Anglo American, which control 74.5% of Palamin, have the option of accepting a higher bid if one is made in the next 90 days.

Shares in Palamin leapt 10% and were last trading at R104/share, possibly as investors sought to participate in a general offer to minority shareholders as set down in the bid statement which Anglo American and Rio Tinto said was binding. Rio Tinto and Anglo added that the bid valued the 80,000tpa refined copper producer at some R5.31billion, which included its cash pile of R2.25 billion.

Approvals from the governments of China and South Africa were expected to take between four to six months, according to an announcement on the JSE.

The consortium is led by Hebei Iron and Steel Group (comprising 35%), described in a statement on the JSE’s news service as a leading international steel producer that was wholly-owned by the Chinese government.

Privately-owned Chinese trading company General Nice Development comprised another 25% which also included diversified Chinese government firm, Tewoo Group (20%), and South Africa’s Industrial Development Corporation (20%).

The Palamin statement said: “The board will continue to monitor the situation and will make further announcements to shareholders as appropriate.”

Rio Tinto chief financial officer Guy Elliott said: “Palabora is a good business, but is no longer a natural fit within Rio Tinto’s portfolio. Selling our stake reflects Rio Tinto’s policy of continually reviewing our portfolio to generate best value for shareholders,” he added.

“I expect Palabora to continue prospering under its new ownership. During the transition we will continue to run the operations efficiently and safely,” he assured.

Rio Tinto and Anglo American revealed in September last year that  they were seeking buyers for their shares in Palamin, so the closure of the deal comes as no surprise, especially as both have been hiving off non-core assets. Rio Tinto in particular has sought to exit from South Africa. It sold its Chapudi coking coal assets for a cut price US$75 million to Coal of Africa last year, for instance, while Anglo American recently sold its shares in Scaw Metals Group to the IDC.

The involvement of the IDC comes at a time when the direct participation of the South African government in South African mining is on the rise.

Apart from the Scaw Metals deal, the IDC was also identified last week as a participant in the establishment of an as yet unnamed niche steel manufacturer purportedly supported by international investors.

The IDC is also expected to participate in seeding a fund that would encourage the development of junior coal miners providing thermal coal to Eskom, the state-owned utility company.

In the case of Palamin, however, there are practical reasons for the IDC consummating the deal, as it sought to secure phosphate production for another state-owned company, Foskor, from Palamin.

It’s also logical that the Chinese government should have an interest in the deal as it is a major buyer of magnetite that Palamin also produces as a by-product to copper. According to its website, Palamin has 140Mt of magnetite stockpiles for which it is developing markets in China.

Source: Miningmx. For more information, click here.