Diversified San Miguel Corp. has bought a little over a tenth of Australia’s Indophil Resources NL, part-owner of the $5.2-billion Tampakan copper-gold project in Mindanao, as part of a deal that could lead to a takeover.
The surprise deal comes three months after China’s Zijin Mining Group Co. Ltd. backed out of a $473-million offer to take over Indophil Resources amid local government regulations that could scuttle what is touted as the country’s largest investment.
Indophil Resources disclosed the $40-million share placement deal with San Miguel to the Australian Securities Exchange on Friday, saying it expected to receive the funds on Oct. 15.
The Australian miner also said it had entered into a "binding exclusivity period" with San Miguel until Jan. 10 next year, during which "San Miguel will complete its due diligence on Indophil and decide whether to submit a control proposal to Indophil."
Indophil said it increased the number of issued shares to 471.4 million from 423.4 million following the deal with San Miguel, which is already into infrastructure, oil refining, and power.
"Engaging the support of San Miguel -- a diversified, global corporation based in the Philippines -- is a strategically important and positive outcome for the continued successful development of its mining interests. San Miguel brings significant financial strength and regional relationships, underpinned by 120 years of operational experience in the Philippines," Indophil Resources Chief Executive Richard Laufmann said in a statement.
"No shareholder approval for the placement is required," Indophil Resources said.
The Tampakan copper-gold project, which covers South Cotabato, Kiblawan in Davao del Sur, and Columbio in Sultan Kudarat, still has to deal with the new South Cotabato environment code which ordered ban on open-pit mining. The project is also facing stiff opposition from the Catholic Church and environmental groups.
The code was signed last June 29 by then Governor Daisy A. Fuentes, a day before she moved on to become representative of South Cotabato’s second legislative district.
Operator Sagittarius Mines, Inc., a unit of mining giant Xstrata Copper, said last month there would be no changes to the production schedule despite the rift.
Indophil Resources has a 37.5% stake in the Tampakan copper-gold project while Xstrata Copper, the world’s fourth-largest copper producer, holds the remaining 62.5%. Indophil Resources bought out Filipino conglomerate Alsons Corp. in January.
Based on Sagittarius Mines’ latest resource estimates, the Tampakan project has 13.5 million metric tons of copper and 15.8 million ounces of gold. Development in the mining site is expected by 2012, while production will start by 2015, with full-scale production scheduled a year later.
San Miguel has been beefing up its war chest for acquisitions, but efforts hit a snag in August after it failed to sell a 49% in its food unit. Unit San Miguel Pure Foods Co., Inc., said it would instead join its parent’s "expansion and participation in high-yielding investments" into "power generation and transmission, water and other utilities, and infrastructure" by selling preferred shares of up to P50 billion.
San Miguel Foods, Inc., San Miguel Mills, Inc., and other subsidiaries "with financial capability" will also sell fixed-rate long-term bonds with a total issue size of P10 billion, "more or less."
The conglomerate began selling parts of key businesses in 2007 to fund diversification from the slow but stable core businesses of food and beverage. BusinessWorld