4th UPDATE: China Zijin Mining Makes A$545 Million Bid For Indophil

China's biggest gold producer, Zijin Mining Group Co. Ltd. (2899.HK), has made a A$545 million takeover bid for Australia's Indophil Resources NL (IRN.AU), seeking to gain access to the US$5.2 billion Tampakan copper-gold mine in the Philippines.

Tampakan is "a world-class copper-gold deposit … (with) an annual production rate of 340,000 (metric) tons of copper in concentrates and 350,000 ounces of gold (about 10.89 tons)," Zijin said in an official filing to the stock exchange, terming the Philippine asset as the key draw of the deal.

Tampakan would boost Zijin's resource reserves and the security of supply to Zijin's copper refining, Chairman Chen Jinghe said in the statement.

The news gave an instant boost to the share price of both companies as analysts speculated the deal is unlikely to face regulatory and other hurdles as Indophil's key asset is outside Australia. At 0426 GMT, Indophil shares were up 10.6% to A$1.20, in a broader Australian market that was up 0.2% while Zijin shares were up 5.6% to HK$8.58 in a broader market which was up 0.5%.

Deutsche Bank analysts said the acquisition looks positive for the Chinese group as it helps it diversify geographically and widens its exposure to a broader range of metals.

Indophil said its directors have recommended the offer, which is pitched at A$1.28 a share and represents an 18% premium to the last trade in Indophil shares and an 83% premium to their average price over the past six months.

Indophil's biggest shareholder and Tampakan's majority owner, Xstrata PLC (XTA.LN), has already entered into a pre-bid agreement with Zijin, giving the Chinese group control of its 19.99% holding in Indophil, subject to a higher offer emerging.

The deal would give Zijin a 34.2% stake in Tampakan with the right to raise this further to 37.5%.

Indophil Chairman Brian Phillips said the deal unlocked value for the company's shareholders and was a positive for the project as Zijin was well placed to fund its share of the US$5.2 billion development.

"The Zijin proposal recognizes Tampakan's inherent value and follows a comprehensive ownership review process in which the board, management and advisers have considered a range of strategic alternatives and proposals from interested parties," he said in a statement.

Xstrata Copper Chief Executive Charlie Sartain said Zijin's offer clearly demonstrates the attractiveness of the Tampakan project.

"Xstrata welcomes the introduction of a joint venture partner with the capacity to support the advancement of the Tampakan project," he said in a statement.

Tampakan has an estimated mineral resource of 2.4 billion metric tons of ore containing 13.5 million tons of copper and 15.8 million ounces of gold.

A feasibility study into the project is due to be completed in the second quarter of 2010 with first production planned in 2016.

Indophil said that, based on current estimates, Tampakan is expected to have an average annual production rate of 340,000 tons of copper and 350,000 ounces of gold in its first 20 years of operation.

A earlier takeover bid by Xstrata, also pitched at A$1.28 a share, was last year rebuffed by the Indophil board, but since then Indophil's shares have been savaged, falling as low as 22.5 cents in January from a peak of A$1.40 in 2008.

The shares have since staged a partial recovery after Indophil revealed that a number of parties had expressed interest in buying its Tampakan stake.

The latest offer is conditional on Zijin winning a 90% stake in Indophil and getting Australian and Chinese regulatory approvals.

Australia's Foreign Investment Review board had previously approved both Xstrata's bid for Indophil and a rival proposal backed by Hong Kong merchant bank Crosby Capital Ltd. (8088.HK).

Some analysts, however, say Zijin is taking on risk associated with the delivery of the Tampakan project, with the mine still in the feasibility stage and located in the politically unstable, southern part of the Philippines.

"Uncertainties exist as to whether (the mine) can be brought to production capacity. The key concerns surrounding the project are political and community relations," Zijin said in its filing to the exchange, warning that "profitability and results of Zijin may be affected if the Tampakan Project cannot be brought to production capacity within this expected time frame (by 2016)."

(Chuin-Wei Yap in Beijing contributed to this report.)

-By Alex Wilson, Dow Jones Newswires; 61-3-9292-2094; alex.wilson@dowjones.com

Indophil Resources (ASX:IRN)
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