Written by; Markus MacIntyre / TCCN Staff Writer
Added on: Fri Jan 01 2010
Corriente Resources Inc. stock rose by 12.7% on Tuesday on news of a friendly takeover by a Chinese consortium. Trading on the Toronto Stock Exchange, Corriente stock rose 96 cents to $8.51 a share.
The Chinese firm Tongling Nonferrous Metals Group Holdings Co. Ltd. and China Railway Construction Corp. Ltd. will pay $679 million to take over Corriente, it announced Monday afternoon. Each share will cost Tongling and China Railway $8.60 in cash. Corriente is mostly concerned with mining in the Corriente copper belt in Ecuador. Tongling will help Corriente finance its metals projects in South America in general.
The transaction will be reviewed by the Canadian government to ensure that it falls within the guidelines contained in the Investment Canada Act. Under this law, whenever a Canadian company with assets greater than $312 million is acquired, the transaction must be reviewed by the government, and there must be a national security test.
As the Chinese economy continues to expand, Chinese companies and investment groups have been making deals around the world to acquire the resources necessary to stoke the hot Chinese economy. Metals, oil, and gas are resources that China has a lot of interest in.
Earlier in 2009, the China Investment Corp. bought a 20% stake of Teck Resources, a Vancouver based coal, copper, and zinc mine. They paid $1.7 billion for the stake in Canada's largest publicly traded mining conglomerates.
Additionally, recently PetroChina made a deal with Athabasca Oil Sands Corp. to acquire a 60% interest in two of the oilsands properties located in northern Alberta at a price of $1.9 billion. This continues a general trend of Chinese companies having shares in Canadian metals companies and energy projects
In making the announcement, Corriente chief executive Ken Shanon said, We are pleased to have reached an agreement with CRCC-Tongguan, who is committed to bringing their version of responsible mining development to Ecuador. The Mirador and Panantza-San Carlos copper projects will require large scale capital investment by CRCC-Tongguan to unlock the infrastructure development, social benefits, and jobs that will flow to the people of Ecuador."
The cash offer of $679 million includes a 27% premium over Corriente's average share price for the 30 days ending Dec. 24. For at least 35 days, the offer will be open, and is subject to certain conditions, including acquisition of at least 66% of the company's shares. Corriente's top officers, who hold 12% of Corriente's shares, will sell their stakes in the company. If the friendly takeover fails, however, Corriente will pay a termination fee of $20 million, depending on the specific circumstances.
Tongling is a state-owned holding enterprise and mining conglomerate that is involved in mineral processing, copper mining, smelting and refining, as well as construction, machine building, trade, and scientific research. China Railway operates in over 60 countries around the world and is one of the largest integrated construction companies worldwide. CRCC-Tongguan was incorporated in China Dec. 10 and is owned jointly by China Railway and Tongling in an effort to develop global mining businesses together.
Copyright: 2009 TCCN.ca