Tuesday, 1 June 2010

Chinese miner Zijin conducts due diligence on Tampakan

Romer S. Sarmiento

GENERAL SANTOS -- A major Chinese miner took its interest to acquire the massive Tampakan copper and gold project in Central Mindanao a step further by visiting the mine development site despite security risks.

John B. Arnaldo, Sagittarius Mines, Inc. corporate communications manager, said yesterday top executives of Zijin Mining Group Co. Ltd., China’s largest gold producer and third-largest copper producer, were recently given a briefing as well as a tour of the development site.

“The top [Sagittarius Mines] management welcomed them,” said Mr. Arnaldo when asked if the visit would end up in the entry of Zijin in Sagittarius Mines, which is controlled by Xstrata Copper, the world’s fourth-largest copper producer.

“The site visit was part of Zijin’s due diligence,” he added.

Mr. Arnaldo said the briefing and inspection would hopefully help Zijin understand better the project, which straddles the towns of Tampakan in South Cotabato, Columbio in Sultan Kudarat, and Kiblawan in Davao del Sur.

The Tampakan project, which has been named by the Regional Development Council and the Regional Mineral Development Council as Central Mindanao’s flagship project, is facing stiff opposition from the Catholic Church and the communist New People’s Army. The latter had launched two violent attacks against the company since 2008.

Zijin’s entry into the Tampakan project, if ever, would be through a takeover of Australian firm Indophil Resources NL, which owns 37.5% of Sagittarius Mines’ 40% controlling equity in the Tampakan project.

The rest of the 40% is held by Xstrata Copper.

The 60% non-controlling equity shareholders of Sagittarius Mines are the Tampakan Mining Corp. and Southcot Mining Corp. (known as the Tampakan Group of Companies). Zijin Mining has set a July 9 deadline for its A$1.28 cash offer per Indophil Resources share.

In a recent statement, the Indophil Resources directors noted that the takeover process is taking longer than originally anticipated, largely due to the extended process required of Zijin in obtaining the necessary approvals from Chinese regulators.

Richard Laufmann, Indophil Resources chief executive officer, said that based on the company’s ongoing communications with Zijin, it was clear the Chinese miner remains fully committed to successfully completing the transaction.

Mr. Laufmann expressed optimism the site visit three weeks ago would lead to Zijin obtaining the necessary approvals from Chinese authorities.

He said the site visit provided officials with the opportunity to discuss the project with various Philippine government agencies, local community representatives, local project staff, and Xstrata as lead manager of the Tampakan copper-gold project.

“I appreciate that Indophil shareholders have shown considerable patience to date. I am confident that all parties are focused on obtaining the required approvals and successfully completing the transaction, which values Indophil at approximately A$545 million,” Mr. Laufmann said.

Accordingly, Indophil Resources’ directors continue to unanimously recommend that shareholders accept the Zijin offer, in the absence of a superior proposal. In April, Sagittarius Mines confirmed it had delivered Tampakan’s Mining Project Feasibility Study, which was undertaken at the cost US$74 million, to the Philippine government.

Based on the company’s latest resource estimates, the Tampakan project involves 2.4 billion tons of minerals, containing 13.5 million tons of copper and 15.8 million ounces of gold. It is touted as the largest undeveloped copper deposit in Southeast Asia.

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