Xstrata boosts Falconbridge stake

Swiss-based mining group Xstrata (XTA-L) has agreed to buy some 370,000 additional shares of Falconbridge (FAL.LV-T) from a non-Canadian investor.

The proposed off-market acquisition, which is subject to approval by regulators in Canada, would push Xstrata’s stake in Falco to around 73.5 million shares, or 20.01%.

Xstrata says the acquisition would not oblige it to make any offer to other Falconbridge shareholders.

In Ontario, buyers are usually required to make a formal takeover bid once their stake exceeds 20%. Exemptions from the rule include private agreement purchases that do not exceed 15% more than market prices, and share acquisitions made outside of Canada.

Earlier this month, Xstrata acquired a 19.9% stake in Falconbridge from asset-management company Brascan (BNN-T) for around $2 billion.

At the time, Xstrata CEO Mick Davis said the acquisition was designed to secure “one of the most significant options available in the mining industry.” The move prompted many market watchers to speculate that Xstrata would eventually launch an outright takeover bid.

While Davis would not confirm whether that was the plan, he did say that Xstrata did not intend to remain as a long-term shareholder with a minority interest.

Privately owned Swiss commodity trader Glencore International owns 40% of Xstrata.

Shares in Falconbridge were 56, or 2.1%, higher at $27.56 in afternoon trading in Toronto following the news on Aug. 31. Xstrata shares ended slightly higher at 1,301 pence in London.

In other news, wide-spaced drilling by Falconbridge has turned up two significant nickel deposits on the Araguaia nickel laterite properties in the north-central Para state, Brazil.

Since October 2004, some 288 diamond drill holes (totalling 13,536 metres) have traced the north-south trending Serra do Tapa deposit over 5 km. The zone remains open at both ends, and varies in width from 800 metres to 1.5 km, with the eastern boundary not yet completely delineated.

So far, complete assay results are in for 160 drill holes, with 116 of these yielding more than 1% nickel over intervals of at least 2 metres. The holes also indicate an average overburden depth of 10.5 metres.

Better results include the following:

– hole TC09-560-160 — 61.7 metres (beginning 1.8 metres below surface) running 1.7% nickel, 12.8% iron, 0.02% cobalt, including 30.4 metres (from 2.6 metres) of 2% nickel, 14.3% iron, and 0.03% cobalt;

– hole TC09-640-160 — 93.4 metres (from 2.7 metres) averaging 1.73% nickel, 21.9% iron, and 0.08% cobalt, including the first 54.9 metres containing 2.2% nickel, 12.82% iron, and 0.04% cobalt; and

– hole TC10-160-320 — 39.3 metres (from 4.3 metres) grading 1.8% nickel, 15.3% iron, and 0.04% cobalt, including the first 19.4-metre interval running 2.2% nickel, 10.9% iron, and 0.03% cobalt.

Falconbridge says the deposit is characterized by exceptionally thick laterite profiles, especially in the northern portion where the weathered zone exceeds 100 metres.

Some 10 km to the southeast, 4,257 metres worth of drilling in 152 diamond drill holes on the Vale dos Sonhos deposit is highlighted by:

– hole FCZ-04-24 — 14 metres (from 8 metres below surface) averaging 1.9% nickel, 13.5% iron, and 0.04% cobalt, including the first 7-metre stretch of 2.7% nickel, 19.1% iron, and 0.06% cobalt;

– hole SJ25-160-480 — 14.4 metres (from 3.6 metres) containing 2.1% nickel, 28.1% iron, and 0.1% cobalt, including 8.9 metres (from 5.8 metres) of 2.6% nickel, 30.5% iron, and 0.1% cobalt;

– hole SJ25-480-480 — 11.7 metres (from 1.8 metres) grading 2.8% nickel, 28.2% iron, and 0.15% cobalt, including 9.3 metres (from 2.8 metres) at 3.2% nickel, 28.7% iron, and 0.17% cobalt.

Both deposits also yielded between 8% and 24% magnesium oxide.

So far, Vale dos Sonhos has been identified over 4 km in a north-northwest trending zone ranging in width between 600 metres and 1.2 km. Some 69 of the 116 holes assayed have yielded more than 1% nickel over at least 2 metres; overburden thickness averages 4.6 metres.

Initial results suggest the mineralization is predominantly a mix of saprolite and transitional nickel laterite, with a minor limonitic component.

The north-south trending, 90-km-long Cinzeiro ophiolite complex hosts both deposits. Falco says the geological setting is similar to those at its Falcondo operations in the Dominican Republic and all of the large deposits in New Caledonia.

Both deposits occur on land already owned by Falconbridge or land that the major can pick up by paying a total of US$2.4 million over eight years.

Falco is in the midst of halving the drill line spacing to 160 metres, with an ultimate goal of closing the drill-hole spacing to an 80-metre grid in anticipation of tallying an inferred resource ahead of an economic scoping study slated for early 2006.

Based on recent airborne surveying, Falconbridge has acquired additional ground to bring its holdings to 3,800 sq. km, and has applied for another 2,000 sq. km of little-explored land along the belt. Evaluation of several targets is ongoing.