zt: Sphere takeover may signal new trend

昨天的澳洲人报，讲到pru和mdl都是take over targets.

XSTRATA launched an out-of-left-field takeover today for a junior explorer for iron ore in Mauritania.

The move could just be a harbinger of a new trend in the minerals business - that is, the goliaths taking over small players because there are so few vulnerable big ones left to target.

Sphere Minerals (SPH) has been labouring away for years to get into production with its 50/50 joint venture partner, the Mauritanian state-owned iron ore producer. It also controls two other promising iron ore deposits in that country. Xstrata is offering $2.50 cash for each SPH share.

The lure must be that this is not just a potentially big iron ore producing project, but a potentially large iron ore project close to the European, North African and Middle Eastern steel producers.

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Related Coverage

* Beer glass half full for brewer chief The Australian, 10 hours ago
* Xstrata's $428m Sphere move The Australian, 10 hours ago
* Xstrata makes move on Sphere Herald Sun, 17 hours ago
* Perth company in $428m Xstrata offer Perth Now, 20 hours ago
* Xstrata signs Deutsche for Sphere deal The Australian, 1 day ago

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Australia's focus on West Africa to date has been largely concerned with gold. But the Xstrata move should be a hint that western and northern Africa could be a significant battleground for other minerals. We have seen, for example, BHP Billiton (BHP) launch an iron ore initiative in Liberia a few months ago.

And some minds clearly moved to thinking about Mineral Deposits (MDL) in this takeover target context, judging by the brisk trading in that stock this morning. MDL owns the emerging Grande Cote mineral sands, zircon-rich deposit in nearby Senegal.

And, as BGF Equities pointed out yesterday, it is only a matter of time before our leading West African gold play, Perseus Mining (PRU), gets taken out. Who else is there left for the Newmonts, Barricks and other gold majors to buy these days?

PRU has impressive gold resources in Ghana and Ivory Coast of a size that would be of interest to one of the majors. And now, with a market cap of more than $1 billion and institutional shareholders who will be looking an attractive takeover bid and the opportunity for a quick cash-out, PRU will be in play sooner rather than later.

Traditionally, the majors have used the junior companies to do the hard yards of exploration. If a project fails, the major writes off its investment and walks away. If it is successful, the cheque book is opened and the junior runs to the bank and then goes and finds another project.

But takeovers, by contrast, have traditionally been about one player taking out another large player - thus the demise of companies like Normandy Mining, Placer Dome, Homestake Mining, Western Mining Corp, and so on.

However, with most of the obvious pieces of prey having already been gobbled up, the big global players may have to feast on snack-sized companies rather than the four-course ones.

Xstrata and SPH may be the start of something big.