OZ Minerals closer than ever to grabbing Brazil-focused Avanco
Australian copper-gold miner OZ Minerals (ASX:OZL) moved closer to having control of takeover target Avanco Resources (ASX:AVB) Thursday, as it declared its cash and shares offer for the for Brazil-focused explorer “unconditional.”
The Adelaide-based company is offering Avanco shareholders 8.5c in cash and 0.009 of its own shares for every Avanco share held, valuing the company at A$418 million (about $320 million).
OZ has already struck an agreement to buy an 18.5% interest in the fellow listed copper junior, which is owned by private equity fund Appian Natural Resources. Mining and commodities trader Glencore (LON:GLEN), however, is yet to agree to sell its 8.27% stake in Avanco, though analysts believe there is little chance of the Swiss firm launching a bid for the takeover target that could rival Oz’s. That offer, presented in March, was made at a 121% premium to the ruling share price of Avanco.
To date, Oz Minerals has managed to grab a 43.5% stake in Avanco, which combined with the commitments made by the company’s management and directors to accept the offer, would increase its shareholding to 46.6%.
The Adelaide-based miner’s cash-and-scrip offer is expected to close on June 14, and OZ would need to announce an extension within 24 hours if it wanted to extend the offer period for a third time. However, the miner did say on Thursday its offer price was final in all respects, adding that it would not be increased.
Avanco has one operating copper mine and two copper prospects within the Carajás region of Brazil, plus an early stage gold prospect in neighbouring Maranhao. The junior currently produces around 14,000 tonnes of copper, but targets around 50,000 tonnes.
Oz has said its bid focuses on entering Brazil’s mineral-rich Carajás region rather than on any specific asset within Avanco’s portfolio.
Carajás has similar geology to South Australia, where copper mines such as Oz’s Prominent Hill, and Carrapateena, as well as BHP’s Olympic Dam are contained in “iron oxide copper gold” structures.
At around 1,800km2, Carajás is the second largest land holding in a region known for iron oxide copper-gold deposits of which Vale’s 200ktpa Salobo is the prime example. In January this year, Avanco acquired an option for 100% of the Rio de Janeiro giant’s Pantera copper project near its Antas mine, which produced about 14,000 tonnes of copper last year and generated $17.3 million of profit.
According to Avanco, the mine is expected to produce up to 13,000 tonnes in 2018.
Comex copper was trading at $3.27 a pound on Thursday, the highest this year, as worries about supply disruptions in top producer Chile resurface.