Tethyan finds buyers in Antofagasta, Barrick

The board of Australian explorer Tethyan Copper (TYCFF-O, TYC-A) is recommending shareholders accept a takeover bid from Chilean copper producer Antofagasta (ANFGY-O, ANTO-L), which replaces an earlier joint-venture agreement.

The new takeover bid, supported by Barrick Gold (ABX-T, ABX-N), offers A$1.20 per share for Tethyan, valuing the company at A$190 million (US$140 million). It peels off a half-interest in the large Reko Diq porphyry-copper deposit in western Pakistan, which goes to Barrick for US$100 million.

Antofagasta has placed a condition of 90% of the shares being tendered on its offer. It also needs the approval of Australia’s Foreign Investment Review Board.

A previous deal to extinguish the back-in right held on Reko Diq by BHP Billiton (BHP-N, BLT-L) has also been revised, with Antofagasta changing its US$50-million offer to US$60 million, conditional on the takeover bid’s success or at Antofagasta’s option.

Barrick’s payment thus covers half the takeover bid plus half the payment for the BHP back-in right.

Tethyan’s former parent company, Western Australian nickel producer Mincor Resources (MCRZF-O, MCR-A), has already agreed to tender a 12.5-million-option position it holds in Tethyan to the bid. Tethyan has signed up to a A$1.9-million break-up fee for Antofagasta if the board recommends another offer.

If the Antofagasta-Barrick bid succeeds, it puts an end to a bid from Hong Kong merchant bank Crosby Capital (CSB-L) announced in May 2005. The bid, which Crosby bumped up to A77.5 in January, started at A64 but had since degenerated from hostile to nuisance to nearly farcical, attracting about 1% of Tethyan’s shares.

Still, Crosby’s principal selling point to Tethyan shareholders — the political risk of a project in western Pakistan — was underscored by increasing violence in recent weeks in the province of Balochistan, where the project is located. Anti-government rebellion is no novelty in Balochistan, which has seen three uprisings — in 1958, 1962 and 1973 — since Partition.

Unconfirmed estimates from restive tribal groups in Balochistan, mostly in the area southeast of Quetta, put the death toll in clashes between locals and Pakistani police and army units at 137, plus unknown numbers of rebels, since December 2005. Three Chinese technicians working on a cement plant were murdered on Feb. 15 by a group claiming to be Balochi separatists, and Western governments have warned against travel to the region.

The project area is in the extreme west of Balochistan, which has not seen significant violence yet.