Chinese government bid to take control of Frieda river mine

With the Chinese government already responsible for pumping millions of tonnes of toxic tailings into the sea in Madang, what future for the Sepik river if the Chinese get their hands on the Frieda mine?

frieda river

PanAust feels heat of $1.1bn Guangdong bid

Barry FitzGerald | The Australian

Laotian copper/gold producer PanAust has again come under the takeover gaze of its biggest shareholder, China’s state-owned Guangdong Rising Assets Management (GRAM).

The cash offer of $1.71 a share is down heavily from last year’s indicative and non-binding offer of $2.30 a share (increased from an earlier offer of $2.20) that never eventuated. But this time at least, the offer is for real, with PanAust shares soaring 49.5c, or 40 per cent from five-year lows to $1.72.

The bid values PanAust at $1.1 billion, with GRAM already owning 22.5 per cent, most of which was acquired in September 2009 when PanAust was in need of a cornerstone investor in the wake of the global financial crisis.

The unconditional cash bid came as PanAust shares struggled in response to the crash in copper prices, and the looming need to finance the development of the 80 per cent-owned Frieda River gold/copper project in PNG.

Credit Suisse analyst Michael Slifirski said the offer was “highly opportunistic’’ given GRAM’s $2.30-a-share indicative offer 12 months ago. He said it took advantage of the equity market’s obsession with short-term earnings and cashflow, and disregard of long-term value.

Credit Suisse values PanAust at $2.11 a share that includes only 25 per cent of its assessed value of an assumed 55 per cent interest in Frieda River (the PNG government can take up to a 30 per cent interest in the project).

“The GRAM offer is too low in our view,’’ Mr Slifirski said.

BT Investment Management portfolio manager and analyst Brenton Saunders said that ignoring Frieda River (PanAust acquired its stake from Glencore last year), the bid was probably not that far from what the existing operations are worth.

“But we can’t ignore the fact that this company has very consciously chosen to go down a path to buy Frieda River, and to develop it — and that is a strategic game-changing decision for the company,’’ Mr Saunders said.

He added that it would be interesting to see how PanAust responds to the bid. “It is beyond me how the board could contemplate recommending this offer given that they were very quick and were very emphatic, in turning down the $2.20, and then a $2.30 offer, as being almost insulting in terms of what it implied in terms of valuation. For them to now come back and recommend anything less than the last one they knocked back seems implausible,’’ Mr Saunders said.

Fred Hess, PanAust’s managing director since November, was asked at a recent investor briefing if management and the board reflected on knocking back last year’s $2.30 indicative offer. “Well I am not. I am not. I am looking forward to the future and I look at the greater certainties we now have with 80 per cent ownership of Frieda River,’’ Dr Hess said.

1 Comment

Filed under Financial returns, Mine construction, Papua New Guinea

One response to “Chinese government bid to take control of Frieda river mine

  1. Moses

    What will the landowners and PNG people gain out of all these buy-ins and bu-out deals of PNG resources and large development projects by outside corporations that really don’t have any resource owning rights to minerals on our land? Aren’t PNGans the rightful owners of these resources? Isn’t the gold ours and not PanAust’s or the Chinese Company’s? Shouldn’t PanAust and the Chinese be buying from us and or just leave our resources alone? I am sure PNG will one day have enough capacity in to develop these on its own?

    Furthermore, PNG is not broke is it? I sure we can comfortably hold on at this time with the few mines we have around backed up by the major LNG projects. Our national economy is certainly reasonable and we can manage and sustain our developmental needs from what we are currently earning.

    High potential mineral reserves like Freida and others should reserved for the future. We are digging up every mineral and everything else now without considering the future.

    I am convinced we can do better than this instead of being mere spectators and letting complete strangers/outside corporations meddle with what are really ours and running off with mega bucks with the bullshit buy-in and buy-outs they are into, and leaving us in what is likely to be non-guaranteed and insecure future for PNG.

    Furthermore, I will be keen and interested to see whether the Chinese will not soon sell-off Freida when Freida Copper shares soar, make mega bucks and piss-off again, etc. What do we gain as resource owners, PNGans and a as a country when this game carries on between outside individuals, corporations and investors? How more ridiculous can the situation be?

    On the more important is the issue of environmental impact management and damage control well, the Chinese? The past and more recent Ramu experience is more than enough to leave a lot to be desired. Furthermore, the Deputy Prime Minister’s raised concerns over PNG line agency control and oversight over environmental impact given the recent Sinivit Mine disaster and environmental and social impact needs to be noted with concern and elevated beyond prominence. That is the least we can as patriots and citizens of the wonderful country, not only for ourselves but obviously for the future generations of this beautiful nation.

    Why do we have to remain too complacent and passive in this country and let unsuspecting individuals and corporations run us down like toads trying to cross a overflowing Port Moreby back street after a heavy downpour, I wonder?. Everywhere else in the world, locals are standing up. They are putting up fights to resist oppression and force over land and resource rights. The South American farmer’s victory in PNG Mine Watch reported this week to protect her farmland and her livelihood and those of her people has to be taken as a class example. Yet we will continue to have corporations wanting it their way with outright bullying and oppressive tactics as they have done to this poor lady. Plis inap liklik lo kain ya. KKK

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