International mining giant, Xstrata, is continuing to try and get its hands on a significant Australian nickel play.
But it might not come without some more money being put on the table, or so punters suggested yesterday.
Frustrated by Russian giant, Norilsk, in the battle for the Canadian-Australian, LionOre Mining, Xstrata yesterday popped out a $3.1 billion off-market offer for Jubilee Mines
The offer, through subsidiary Ithaki Australia Pty Ltd, involves an all-cash offer of $23 per share, representing 35% over Jubilee's closing price of $17.10 last Friday.
Xstrata claimed the price was also a 36% premium over the volume weighted average price of Jubilee shares over the last 30 trading days on the ASX, and a 25% premium to Jubilee's all time record high share price.
Jubilee and Xstrata have entered into a binding agreement over the all-cash offer and Jubilee's board has recommended the offer unanimously.
The Offer will be financed through Xstrata's existing credit facilities and cash on hand.
"Xstrata's bid offers shareholders a compelling opportunity to realise in cash the substantial growth in value created by their investment at an attractive point in the commodity cycle and equity markets overall, without taking on the risks associated with the next phase of Jubilee's development," Jubilee executive chairman, Kerry Harmanis, said in a statement to the ASX.
"Jubilee is … at an important stage and will benefit from the deeper capabilities and balance sheet of a major mining company such as Xstrata to maximise the potential of its resource base."
And Xstrata Nickel chief executive, Ian Pierce, said Jubilee had an established record of creating shareholder value. "Jubilee offers Xstrata Nickel immediate access to additional production, geographic diversification and introduces substantial near term growth potential into its portfolio," Mr Pierce said.
"In particular, the combination of two of the most successful exploration teams in the nickel industry, together with Jubilee's highly prospective regional land position, offer excellent prospects for significant additional growth in the region."
Jubilee announced last week a jump in annual net profit, from $103.4 million in 2005/06 to $173.1 million in 2006/07.
The news sent Jubilee shares up more than 40% and they ended $6.91 to $24.01 – suggesting punters saw a possible counter offer appearing. They eased a touch to end up $6.72 at $23.82.
The tip was BHP Billiton, but that sounds a case of the 'usual suspects' than any knowledge.
As part of the deal, Mr Harmanis and other directors and senior management have agreed to sell their combined 17.5% per cent stake to Xstrata even if a higher offer emerges.
In addition there is a $31 million break fee.
Earlier this year, Xstrata made a $5 billion friendly offer for Canadian-listed, LionOre Mining, which also owned nickel mines in WA. Xstrata entered a "lock-up agreement'' to secure 19% of its target but the deal wasn't good enough and Xstrata was overbid and then outbid by Norilsk Nickel.
In fact Xstrata's first attempt to enter WA nickel was launching a hostile bid for WMC Resources in 2004 that was overbid by BHP Billiton.
Xstrata's other nickel mines are in Canada which it picked up in 2006's big acquisition of Falconbridge. It is constructing a laterite project in New Caledonia.
Xstrata is also the world's third-largest copper mining company, and a major coal miner.
It owns the Mount Isa Mines operation in northern Queensland and has coal interests in that state as well as NSW.
Jubilee said yesterday it had been running a quiet auction in recent weeks after receiving a number of approaches.
A number of companies, including Xstrata, were allowed to do due diligence and Xstrata followed its work up with the agreed bid.
Jubilee owns and operates the Cosmos nickel project in Western Australia and is building the Sinclair nickel project, the statement said. It also has eight nickel sulphide deposits near Cosmos.
Xstrata Nickel produced more than 110,000 tonnes a year and Jubilee is targeting output of about 30,000 tones from 2011.
