Jinchuan Group Co., the biggest Chinese nickel producer, is considering bidding for Metorex Ltd., the target of a $1.1 billion offer from Vale (VALE:US) SA, two people familiar with the deal said.
Nothing has been decided, one person said, asking not to be identified as it’s too early in the process. Johannesburg-based Metorex, which said June 17 it received an unsolicited approach from another party, declined to comment. Wang Wanshou, a Jinchuan official, said he had no information on the deal.
Vale, seeking to boost copper output almost fivefold to 1 million metric tons by 2015, bid 7.35 rand ($1.07) a share for Metorex on April 8 in a transaction that would give the Rio de Janeiro-based company the Ruashi open-pit mine in the Democratic Republic of Congo and the Chibuluma copper development in Zambia. Metorex shareholders are scheduled to vote on Vale’s offer on July 22.
Jinchuan Chairman Yang Zhiqiang said in a March 7 interview that the company is looking to buy stakes in overseas copper mines. Jinchuan, based in Gansu Province, took over Wesizwe Platinum Ltd. (WEZ), a Johannesburg-based platinum explorer listed on the city’s stock exchange, this year.
“It is diversifying businesses to hedge price risks on one single metal,” said Zhang Fang, an analyst with China Securities Co. Jinchuan accounts for 90 percent of China’s nickel output, according to its website.
Metorex has gained 10 percent in Johannesburg trading since April 7, the day prior to Vale’s offer announcement, giving the company a value of 7.83 billion rand. The shares gained 0.7 percent to 7.80 rand by the 5 p.m. close in Johannesburg.
There have been 1,548 deals done this year in mining and energy, worth $202.5 billion, according to data compiled by Bloomberg. That’s the biggest first half since 2007. Barrick Gold Corp. offered C$7.32 billion ($7.4 billion) for Zambia-focused copper producer Equinox Minerals Ltd. in April, beating a C$6.04 billion bid from China’s Minmetals Resources Ltd.
Metorex has an estimated 4.74 million tons of copper resources, including 1.8 million tons at the Lubembe project in Congo, the company said in April. Copper for delivery in three months traded at $9,010 a ton in London, having gained 31 percent over the past year.
Closely held Jinchuan is looking to buy stakes in mines with resources greater than 1 million tons to boost its holdings to 20 million tons in five years, Yang said in March. The company produced about 400,000 tons of copper, 130,000 tons of nickel and 6,000 tons of cobalt last year.
Last year it bought Vancouver-based Continental Minerals Corp. for C$432 million and Toronto-based nickel producer Crowflight Minerals Inc. for $140 million.
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To contact the editors responsible for this story: Rebecca Keenan at firstname.lastname@example.org; John Viljoen at email@example.comVisitors observe the construction of ore processing tanks at Metorex's Ruashi copper mine, near Lubumbashi, Democratic Republic of Congo. Photographer: Naashon Zalk/Bloomberg