Jien Nickel in JV bid for Canadian Royalties

By Chen Xiaomin

China's Jilin Jien Nickel Industry and Canada's Goldbrook Ventures (GBK) have launched a joint tender offer to acquire mineral explorer Canadian Royalties.

“The deal will add to our nickel resource reserves to help meet the company’s annual capacity – 20,000 tons of nickel,” Jilin Jien, China’s second largest nickel miner, wrote in an announcement posted on the Shanghai Stock Exchange website yesterday.

The joint venture between Jien and Goldbrook, known as Jien Mining Canada, announced the bid Friday to seek all stock rights and 7 percent convertible senior unsecured debentures due March 31, 2015. The offer will remain open until September 15.

The Shanghai-listed company said it would pay C$148.5 million ($137 million), mostly with its own equity fund, in addition to 500 million yuan ($73.15 million) in loans. As of March 31, the company’s assets liabilities ratio was 47 percent.

The target company Canadian Royalties holds 25.34 million tons of ore, containing 228,000 tons of nickel and 277,000 tons of copper in its six proven mineral deposits, with a huge potential of exploration in its four other newly discovered mineral deposits.

This is Jien’s fifth major cross-border cooperation this year including a stake purchases and a joint exploration.

The company said five days ago it had bought a 14.7 percent stake in Toronto-based Victory Nickel for 18.4 million yuan ($2.7 million).

It got the green light from National Development and Reform Commission in May to purchase a 51 percent stake in Canada-based Liberty Mines, whose nickel reserves total 46,700 tons.

In the same month, it became the largest shareholder of Australia-based Metallica Minerals with 290,000 tons of nickel reserves.

Also in May, Jien said in an announcement it planned to spend 248 million yuan ($36.28 million) more in a joint exploration program with GBK.

Analysts are upbeat on nickel with strong stainless steel demand worldwide whose output witnessed a 16 percent quarter-on-quarter hike from April to June.

“Nickel prices will keep ascending in the next quarter,” Zhang Fang, a nonferrous metal analyst with China Securities, said yesterday.

Zhang said abundant liquidity and an upbeat economic outlook helped boost nickel prices, alongside with price hikes in other nonferrous metals.

Li Zhuiyang of CITIC Securities wrote in a report yesterday that he was optimistic about nonferrous metal plate at Shanghai Stock Exchange (SSE) and recommended Jien.

Jien closed at 37.24 yuan ($5.45) yesterday, down 8.90 percent. However Jien, known as a bullish shares at SSE, with increase rate in the latest six trading days hitting 30 percent.

China’s demand for nickel witnessed a rebound in June. It imported 41,008 tons of refined nickel, up 406.4 percent from a year earlier.

Average nickel price climbed to 108,000 yuan ($15,801) per ton in the second quarter from 87,000 yuan ($12,729) in the first quarter. The price is still low compared with last year, when the average price for the first half of 2008 was $27,000 per ton.

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