PanAust Ltd., an Australian copper miner that’s the target of a A$1.1 billion ($1 billion) takeover approach from a Chinese investment company, has held talks with large global producers over potential rival bids.
State-owned Guangdong Rising Assets Management Co. has offered A$2.30 cash a share in a conditional proposal for the Brisbane-based producer. PanAust, which in May said it had rejected the bid from its biggest shareholder as too low, has since had discussions with copper producers and other parties, Managing Director Gary Stafford said today in a phone interview.
PanAust has spoken to a range of groups “that have a strategic interest in copper that may not have a current interest in copper mining,” Stafford said. It has also talked with companies that are “currently in copper mining and would see us as a good bolt on acquisition,” he said.
Acquiring PanAust would give the buyer control of mines in Laos as well as the Frieda River project in Papua New Guinea, described by the target as one of the world’s largest undeveloped copper and gold deposits. The copper producer expects Guangdong Rising to improve its proposal after completing a review of financial data, Stafford said.
Guangdong Rising, which owns 23 percent of PanAust according to data compiled by Bloomberg, is continuing due diligence work after it was granted access to data in early June, Stafford said. “The time they are taking provides a window for other parties to catch up,” he said.
Other parties involved in talks are also being offered the information, and include organizations from outside Asia, according to Stafford. “They are very significant groups with significant capacity.”
Copper may slide into deficit from about 2017, with 4.5 million metric tons of new production capability needed to meet demand by 2022, according to Wood Mackenzie Ltd.
Frieda River may produce 100,000 tons of copper and 160,000 ounces of gold annually and have a mine life of 18 years, according to a company filing.
PanAust has traded below Guangdong Rising’s offer price, signaling investors don’t expect it to succeed. The stock advanced 1.9 percent to A$2.19 at the close in Sydney.
“I would be most surprised if” Guangdong Rising pitched the same offer or a lower offer, Stafford said. “I’d be surprised and I don’t suppose the meeting would last very long.”
PanAust agreed last year to buy Glencore Plc’s stake in Frieda River, estimating the development costs at as much as $1.8 billion.