Johannesburg, South Africa — MININGREVIEW.COM — 04 October 2011 – South African base metals miner Metorex says its proposed takeover by Jinchuan is proceeding according to schedule, despite a sharp drop in the group’s share price on fears that the Chinese commodities giant might be having second thoughts over the deal, reports Miningmx.
“The closing of the Jinchuan transaction is proceeding on plan and in line with the timetable as set out in the circular sent to shareholders on 2 August 2011,” read an announcement which was issued with the company’s quarterly report.
In July Jinchuan made a R8.90 per share bid – amounting to R9.1billion “’ for the JSE-listed copper and cobalt producer which owns operating assets in the Democratic Republic of Congo (DRC) and Zambia. But, says Miningmx, Metorex in recent days traded below R8.00/share, prompting speculation that some investors might be viewing the Jinchuan offer, despite its guarantees, with scepticism.
An article published by Business Day yesterday listed two reasons for this: first, Jinchuan appeared not to have the required Chinese regulatory approval. Second, the falling copper price might also prompt the company to walk away from the deal, similar to what compatriot China Guangdon Nuclear Power did when it dropped a bid for Namibian uranium miner Kalahari Resources in the wake of the Fukushima nuclear disaster.
But analysts disagreed, saying neither the depreciation of the copper price, nor a fall-out from Zambian President Michael Sata’s election victory should be viewed as negative catalysts for the deal.
“The Chinese are the biggest foreign investors in Zambia,” UBS Investment Bank said in a note to clients. “The MinMetals/Anvil deal is an indication of positive sentiment by the Chinese, especially since the deal metrics look more expensive,” the note continued, pointing to Friday’s announcement of a US$1.28 billion bid by China’s Minmetals for Anvil Mining, also an African copper player.
“We believe the Metorex deal is a strategic purchase for China. Jinchuan will use Metorex as a platform to expand operations in Africa.”