FNX Mining, Aurora Platinum plan Sudbury nuptials

Looking to boost its portfolio in the Sudbury mining camp, FNX Mining (FNX-T) plans to acquire Aurora Platinum (ARP-V) via a friendly, all-stock deal valued at $39 million.

Under the plan, Aurora shareholders are offered one FNX share for every five Aurora shares. The exchange ratio is conditional upon FNX’s weighted share price remaining in the $7.50-to-$11 range during the ten business days ending June 14, 2005.

At that rate, the proposed transaction values Aurora shares at $1.83 apiece, based on FNX’s closing share price of $9.17 on May 3, the day before the deal’s announcement.

At share prices exceeding $11, the exchange rate varies such that Aurora shareholders would receive a value of $2.20 per surrendered share; at prices between $5 and $7.50 the value slips to $1.50 per share. If FNX’s shares dip below $5, the rate shifts to one FNX share for every 3.3333 shares of Aurora.

FNX already has the support of shareholders owing around 38% of Aurora’s outstanding shares. The transaction requires regulatory approval, and the support of at least of 66% of the votes cast at Aurora’s shareholders meeting on June 20.

For its part, Aurora has agreed not to solicit competing bids, but retains the right to entertain any unsolicited offers. The proposed deal includes a $1-million break-fee payable to FNX should Aurora opt for a competing bid within a specified period.

Aurora can terminate the proposed merger deal before shareholder approval in the face of a competing transaction that is not matched by FNX. The deadline for a formal agreement with FNX is July 31, 2005.

Aurora holds various interests, and an extensive land position in the Sudbury Basin. Its key asset is a 60% stake in the Falconbridge Mine property, which is home to the historic Falconbridge mine, which produced 33 million tons of ore averaging 1.58% nickel and 0.89% copper. The property’s Falconbridge East mine produced 8.7 million tons of ore running 1.15% nickel and 0.76% copper. Falconbridge owns the remaining 40% of the property.

A mineral inventory of mineralization remaining in the two mines upon their closures in 1984 and 1990 includes 1.65 million tons of “proven” ore grading 1.5% nickel, 0.92% copper, 0.07% cobalt. Another 790,000 tonnes of “possible” material runs 1.25% nickel, 0.75% copper, and 0.06% cobalt. The figures do not conform to the standards of National Instrument 43-101.

The property also contains more than 8 km of favourable, and relatively unexplored Sudbury basin footwall environment. Earlier this year, drilling by FNX and Sudbury joint-venture partner Dynatec (DY-T) encountered some impressive grades in such an environment. Hole 6010, collared behind the Levack no.2 nickel-copper mine shaft, 40 km north of Sudbury, Ont., was highlighted by a 3.1-metre core section (beginning 1,634 metres below surface) grading 26.2% copper, 3% nickel, plus 4.2 grams platinum, 9.8 grams palladium, and 0.45 gram gold per tonne (T.N.M., Apr. 22-28).

Aurora also holds a large land position covering a 10-km section of the Foy Offset dyke, which radiates from the North Range of the Sudbury Basin. The dyke is one of several concentric radial dykes related to the Sudbury Igneous complex, and is host to significant nickel-copper-platinum-group-element mines and prospects.

The company also has exposure to gold through its 16.8% stake in Lake Shore Gold (LSG-V), and to diamonds via a 20.6% interest in Superior Diamonds (SUP-V).

Pending completion of a formal agreement, FNX plans a detailed review of Auroras’ data; initial work will focus on the Falconbridge Mine property. FNX will also assume management of all of Aurora’s exploration programs.

In late 2003, the Sudbury joint venture moved to full ownership of the formerly producing McCreedy West, Levack, Norman, Kirkwood and Victoria properties optioned from Inco (N-T). FNX has a 75% interest in the Sudbury joint venture; Dynatec holds the remaining 25%. The two officially reopened the McCreedy West mine in mid-September.

In the boardroom, Aurora’s CEO Daniel Innes will join FNX’s board.

Shares in Aurora were 81, or 81%, higher at $1.81 in late afternoon trading in Vancouver following the news on May 4; FNX was 31 better at $9.48.