Looming Vale-Xstrata mega-merger shelved — for now

The thirteenth trading week of 2008, ending March 29, saw resource stocks adjust to wildly fluctuating bullion and financial markets as investors jumped around looking for safety and a hedge against U. S. economic woes and the falling greenback.

• Brazilian mining giant Vale pulled away from the table in takeover discussions with base metal and coal miner Xstrata, citing strong opposition to the deal from Xstrata’s largest shareholder, Glencore International. The roughly US$90-billion cash-and-share informal offer from Vale is reported to have stalled when Glencore, which owns about a third of Xstrata and has marketing rights to some of its production, looked for a sweetened bid and retention of its rights. Vale will now sit back and reassess its acquisition agenda — possibly revisiting negotiations with Xstrata later this year.

Meanwhile, Xstrata is rumoured to be on the acquisition trail itself, eyeing smaller fish such as copper miner First Quantum Minerals and Aussie aluminum producer Alumina. Some analysts have predicted the Swiss-based miner may also look to align with other majors, with names such as Freeport-McMoRan Copper & Gold, Alcoa, Lonmin and Anglo American being bandied around.

• Sudden word that Barrick Gold boss Greg Wilkins is taking a leave of absence to deal with an undisclosed medical condition sees the gold giant’s chairman and founder Peter Munk stepping back into an acting CEO role on an interim basis. Best wishes go to Mr. Wilkins for a speedy recovery.

• Just a few days prior to its deadline to make a decision on development of the large Petaquilla copper project in Panama, Teck Cominco inked an agreement with project partner Inmet, offloading a US$50-million funding commitment. Once Inmet has spent the US$50 million, Teck will decide if it will continue in the deal and reimburse its partner. The Vancouver-based integrated miner is earning a 26% interest in the deal from Petaquilla Copper (which also holds 26%) while Inmet has 48%.

A 1998 feasibility study reviewed three main porphyry deposits on the Petaquilla area with minable reserves of 1.1 billion tonnes grading 0.5% copper, 0.09 gram gold and 0.015% molybdenum. The report proposed a 120,000-tonne-per-day throughput and a 23-year mine life with a stripping ratio of 0.97.

While the price tag for development of the big copper deposit is forecast to come in around US$3.5 billion, Teck Cominco has the wallet and the clout to springboard the operation if it chooses to, especially after shelving its plans to develop Galore Creek (with NovaGold Resources) last year, when costs escalated to an estimated US$5 billion.

• Serengeti Resources gave shareholders an Easter gift in the form of a 610-metre drill intercept grading 0.74% copper and 0.78 gram gold per tonne from its Kwanika property in north-central B. C. The hole, which included a 75.4-metre section running 2.28% copper and 1.9 grams gold, prompted the stock to climb as high as $1.85 per share from around 60 on strong volume. Shares of the B. C. copper-gold explorer crashed in mid-2007 — from the $4-range to around $1 –when drill results showed a drop in grade versus earlier wide, mineralized intercepts.

• On the heels of posting a US$154-million loss for 2007 (related to its merger with EuroZinc and the acquisition of Rio Narcea), Lundin Mining tabled reserve and resource figures showing a major boost to the base metal producer’s zinc inventory. Proven and probable zinc reserves rose roughly 61% to more than 59 million tonnes averaging 7.3% zinc, plus lead and copper values.

• Junior uranium market darling Hathor Exploration got another market boost on word six additional drill holes from its Midwest NorthEast project, in the eastern Athabasca basin, cut uranium oxide mineralization. The holes were cored in the immediate vicinity of its recent discovery hole (MWNE-08-12), which cut 11.9 metres of 5.29% U3O8 on the newly dubbed Roughrider zone.

Hathor shares have surged roughly 400% since late February to more than $2.50 apiece from around 50. In hindsight, shareholders of Northern Continental might have some remorse; they rejected a hostile takeover offer from Hathor that expired just over a week before it announced its high-grade uranium values. Hathor had offered Northern Continental shareholders 0.4 of a share for each share tendered.

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