Metals News
UPDATE 1-Nyrstar Bids for Miner, Plans Rights Issue
industry news
10:02AM
Nov 17,2010
Source:SMM

BRUSSELS, Nov. 16 -- Nyrstar (NYR.BR: Quote), the world's biggest producer of zinc, made a C$409 million offer ($405 million) for Canadian group Farallon Mining (FAN.TO: Quote) and said it plans a rights issue of up to 500 million euros ($699 million).

Nyrstar said it was offering up to C$0.80 per Farallon Mining share, a 23 percent premium to the Nov. 12 close, as part of a move to increase its own supplies of zinc.

The Belgium-based group also said it would ask shareholders to approve a rights issue of up to 500 million euros, just under half of Nyrstar's present market value.

Nyrstar said the issue, to be carried out by the end of August 2011, was designed to strengthen its balance sheet so as to deliver on its strategy, which has increasingly focused on buying zinc mining assets.

"The deal announced today seems quite attractive," KBC Securities analyst Wouter Vanderhaeghen said, cautioning that he still had to conduct some calculations.

"If they want to move towards 50 percent integration (of mining operations) then it's quite clear they are not going to do that via their own cash flow, so probably the rights issue is the right way to raise money."

Nyrstar shares dropped as much as 8.3 percent to an eight-session low 10.55 euros, still up 53 percent from a 2010 low hit in May.

The acquisition of Farallon would be financed by existing resources and credit facilities, Nyrstar said.

Nyrstar has so far acquired, or bought stakes in, mines in the United States, Greenland and Peru.

Farallon owns the Campo Morado zinc-rich mining operations in Mexico, comprising 12,000 hectares in six mining concessions some 160 km south of Mexico City.

Nyrstar said the Farallon acquisition would increase its capacity for zinc metal production from own concentrates by 6 percentage points to 31 percent and cut group mining costs to less than $1,000 per tonne by 2012.

Holders of 18.9 percent of Farallon's share capital have taken up the offer, which has been recommended by the company, Nyrstar added.

The offer is conditional on Nyrstar receiving acceptances representing two-thirds of Farallon's capital.

($1 = 1.010 Canadian dollars = 0.7158 euro)


 

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