Norilsk Nickel’s expiry of an extended time for all cash offer to LionOre International is due to expire on Monday which makes it certain that the Russian mining giant’s aggressive deal will sail through without any challenge.
The extended expiry time announced two weeks ago was aimed at providing the existing shareholders of LionOre with long-dated convertible notes (bond) to 2011 to convert their shares into ordinary shares to enable Norilsk to settle them with cash.
“This will enable the note holders to receive cash shortly after depositing such common shares to the offer as opposed to waiting until Norilsk Nickel undertakes a subsequent compulsory acquisition transaction,” Norilsk Nickel said in a statement.
Norilsk Nickel has been impatient about clearing all shareholders out of the picture after its aggressive second bid that beat that of the Swiss company Xstrata.
Norilsk Nickel’s bid is valued at 6.8 billion Canadian dollars and makes the company the world’s largest producer of nickel, palladium and one of the largest producers of platinum and copper.
The bid was 10 percent better compared to Xstrata bid.
“Norilsk Nickel’s decision to increase its offer reflects the quality and strategic value of LionOre to our company, which will give us greater scale in key commodities, enhanced geographic diversification and an exciting pipeline of growth projects,” Norilsk Nickel’s general director, Denis Morozov said in a statement.
The Russian company said its bid has been discounted due to the “excessive” C$305 million break fee that will go to Xstrata if the U.K.-listed, Swiss-headquartered miner doesn’t up its own offer further.
LionOre which is headed by Colin Steyn is attractive because of its rich nickel resources at Tati Nickel mine ÔÇösome 45 kilometers south-east of Francis town and its reserves in South Africa and Australia.
LionOre, which is the tenth biggest nickel mining company in the world, is also strengthened by its trail-blazing technology Activox which uses leaching technique that eliminates the traditional and costly smelting process.
The bidding companies are interested in both the company’s resources and acquiring the Activox technology which is tightly held under LionOre International patent rights.
Suitors have expressed a lot of interest in the acquisition of the Activox technology still under construction in Botswana and is due for completion in 2009.
The bid has been praised by local analysts saying that it will translate into more cash for the local investors, but they were almost certain that the new company that will emerge will not be interested in listing on the Botswana Stock Exchange (BSE).
“What will happen is that LionOre is going to de-list because it will be non existent. And I doubt as to whether Norilsk will be interested in listing BSE. They are a big company and they do not need Botswana money. If they want to raise money they can easily do that in other markets,” Managing Director for Capital Securities, Gregory Matsake, said.
“Politically, it will be nice to see Norilsk listing on the BSE because top fund managers in Botswana have invested heavily in LionOre,” he added.
Meanwhile, the Botswana government was unnerved by the developments saying that it is not considering selling its shares in LionOre operations in the country.
Government holds 15 percent share in its joint venture with LionOre at Tati Nickel mine and they are also involved in a complex cross shareholding structure at BCL. At BCL both government and LionOre have a stake in BRST the holding company that owns BCL mine.
Chartered Company has 1.4 percent, LionOre has a further 6.3 percent and GRB (Government of the Republic of Botswana has a further 7.5 percent).
“The company has said it is buying LionOre shares, not Botswana government shares. And government will continue to have an interest in the joint operations in the country,” Deputy Permanent Secretary in the Ministry of Mineral, Kago Moshashane, has said.
The bid will mean that LionOre will sell its interest in all its operations in Botswana, Australia and South AfricaÔÇöwhere they own 50 percent of the Nkomati mine.
Norilsk Nickel is named after the town of Norilsk located 300 kilometers north of the Arctic Cirle and which began life as a Soviet forced labour camp under the rule of Stalin in 1935. The company is one of the very few giant Russian operations which do not have direct government control following its privatization in 1997. It has a market value of US $ 36 billion.
Norilsk is involved in the production of a number of minerals such as nickel, palladium, platinum and copper. It also owns cobalt mines, rhodium, silver gold, tellurium, selenium, iridium and ruthenium.