Tuesday, 7 August, 2007

Sydney Morning Herald

RAPIDLY growing mid-tier miner Oxiana has simplified the structure of its uranium interests through a $400 million merging of its uranium affiliates, Toro Energy and Nova Energy, amid talk of more consolidation in the booming mining industry.

Oxiana will emerge with a 46 per cent stake in the combined company, which will have uranium development projects in Western Australia, South Australia and the Northern Territory along with overseas exploration projects. Toro is offering 5.5 of its shares for each Nova share, equivalent to a 19 per cent premium to Nova's closing price before a trading halt on Friday morning.

Oxiana isn't the only mid-tier miner targeting uranium. After a presentation at the Diggers and Dealers conference in Kalgoorlie yesterday, Peter Kukielski, the chief operating officer of diversified Canadian miner Teck Cominco, said his company was interested in diversifying into uranium, nickel and iron ore.

"We look at opportunities as they come up," he said; "just not the right one has come up yet."

Although Teck has made a $C4 billion ($4.43 billion) bid for South American copper miner Aur Resources, it remains cashed up and hunting for other acquisitions following its failed $US17.4 billion ($20.3 billion) tilt at Canadian nickel miner Inco last year.

Citigroup recently said a merger between Australian mid-tier miners Oxiana and Zinifex would make sense and would fill a void in the mining space following BHP Billiton's purchase of WMC Resources and Xstrata's acquisition of MIM.

"We're always on the lookout for merger and acquisition activity," the managing director of Oxiana, Owen Hegarty, said yesterday, "from the smaller, bolt-on activity through to the company transformer."

Zinifex's chief operating officer, Brett Fletcher, said his company was also looking for attractive assets even though it only recently completed the $400 million purchase of the Canadian explorer Wolfden Resources. Analysts expect Zinifex will receive about $2.5 billion following the spin-off of its smelting business later this year.

"The objective is to have high-margin, long-life mines," Mr Fletcher said.

Both Zinifex and Oxiana have been deemed potential targets for Teck, given their size, assets and commodity mix. Zinifex owns the world-class Century zinc mine, but the operation does not have a particularly long life remaining. Oxiana has attractive copper, gold and base metals assets but they are probably too small to attract attention from the world's largest miners, such as BHP Billiton, Rio Tinto and even Xstrata. Teck is one of the few diversified miners not averse to producing gold. Oxiana produces gold in Laos and is developing a gold project in Indonesia.