Peru Copper likes $840-million Chinese takeover plan

Vancouver – Management of Peru Copper (PCR-T, CUP-X) has thrown its support behind what is being called a friendly $6.60 per share takeover offer tabled by Beijing-based Aluminum Corporation of China (ACH-N) (Chinalco).

The definitive takeover agreement, valued at about $840 million, comes after Peru Copper announced in late-May it had entered into an exclusivity agreement regarding a potential transaction. The all-cash offer is a 21% premium to the 20-day volume weighted average price leading up to the Peru Coppers May 23rd exclusivity announcement.

Peru Coppers entire board recommends acceptance of the offer and has entered a lock-up agreement, along with other shareholders, representing about 34% of the companys fully-diluted outstanding shares.

Concurrent to its takeover offer, Chinalco has also agreed to take down a $70-million private placement in the company comprised of about 13.2 million Peru Copper shares at $5.30 apiece. Its share subscription will give the diversified mining and metals company a 9.9% stake in the junior.

The prize eyed by Chinalco is Peru Coppers large Toromocho porphyry copper project, in central Peru, hosting almost 1.4 billion tonnes of proven and probable reserves grading 0.51% copper, 0.018% molybdenum and 7.1 grams silver per tonne. An additional measured and indicated resource of 601 million tonnes of 0.37% copper 0.016% molybdenum and 6.8 grams silver has also been also tabled.

An early-2006 pre-feasibility study and technical report on Toromocho delivered robust economics for planned mine development at the deposit. An after tax 16.7% internal rate of return and a US$922 million net present value was estimated (using US$1.30 per lb. copper) for the proposed open pit operation producing up to 273,000 tonnes (601 million lbs.) copper and 12 million lbs. molybdenum annually over a 20-year reserve life.

The project is forecast to have a very low waste-to-ore strip ratio of about 0.57-to-1 and has most of the necessary infrastructure (roads, water, power, railway and skilled labour pool) in place.

Additionally, recent exploration by Peru Copper has identified two large zinc and copper mineralized skarn zones peripheral to the large collapsed breccia pipe that hosts the main Toromocho deposit.

Chinalco is Chinas largest diversified metals and mining company and is primarily focused on the aluminum industry but is involved in exploration and development of copper, rare metals and other non-ferrous metals. It holds a 40.46% stake in Chalco, the largest primary aluminum producer in China.

Peru Copper acquired Toromocho in mid-2003 through an option agreement with Peruvian state-owned mining company Empresa Minera del Centro del Peru (Centromin).

Shares of the junior notched up 11 on the takeover offer to close at $6.46 apiece on strong volume. The stock price has a 52-week trading range of $3.65-$7.52, with its high occurring in late-May following announcement of its exclusivity agreement.

Chinalco is entitled to a $21-million non-completion fee if its acquisition does not occur, under specific circumstances, and holds the right to match any higher takeover proposals.