May 10 (Bloomberg) -- The Democratic Republic of Congo said it won't approve a $284 million bid by China's Zijin Mining Group Co. and CAD Fund to buy copper mine developer Platmin Congo because it violates regulations.
The offer is "in violation of applicable regulations," Alexis Mikandji Penge, the chief of staff for the minister of mining, said in an e-mailed statement. "As a result, it has no effect in the Democratic Republic of Congo."
Zijin, China's largest gold producer, and Chinese state- backed CAD are buying Platmin Congo to get hold of assets including stakes in two copper-cobalt projects. The U.S. last month asked Congo to improve its business climate after a Freeport McMoRan Copper & Gold Inc.'s project was in dispute for two-and-a-half years.
"Benefits to Zijin are almost negligible in the next three years, given their plan to start production in 2013 and the huge political risk in Congo," said Owen Liang, an analyst at Guotai Junan Securities Co.
The Central African nation has one of the worst business climates, according to the World Bank's 2010 Doing Business guide. Congo ranks 182nd out of 183 countries on the list.
"The Minister of Mines of the Democratic Republic of Congo denounces and disapproves of the transaction between the Platmin and Zijin companies," the e-mail statement said.
The opposition is another setback to Zijin's expansion plans, as the company seeks two major overseas acquisitions this year to increase reserves. Zijin is still waiting for Chinese regulatory approval for a A$545 million ($492 million) takeover of Australia's Indophil Resources NL to gain a stake in Southeast Asia's largest untapped copper and gold deposit.
Zhao Jugang, head of board secretary office at Zijin, couldn't immediately be reached for a comment. The company in its May 7 statement announcing the acquisition had said "there is uncertainty in obtaining" approvals from the two governments.
Zijin will own 60 percent of a venture controlling the assets, with CAD having the rest. CAD, invested in by the China Development Bank Corp., has an initial capital of $1 billion and aims to support Chinese companies in African investments, according to Zijin's statement.
"While the acquisition is pending for approvals from both the Congo and Chinese governments, we view it as a reflection of Zijin's persistent efforts in seeking new growth drivers," Credit Suisse Group AG analysts including Trina Chen said today. The acquisition may boost Zijin's earnings before interest, taxes, depreciation and amortization by 6 percent after 2013, the analysts wrote.
Congo holds 4 percent of global copper reserves, is among the world's largest producers of cobalt and industrial diamonds, and is Africa's largest producer of tin ore, according to the U.S. Geological Survey.