Jien Canada – Acting Fresh?

By Kishori Krishnan Exclusive To Nickel Investing News

This is one overture that has not gone down well. Suitor Jilin Jien Nickel Industry Co Ltd made fresh advances to Canadian Royalties Inc, developer of the $600 million Nunavik nickel-copper-platinum mine in Northern Quebec, by extending its $192 million bid.

The sweetened offer, extended from October 27 to November 10, will see the Chinese firm scoop up all the shares of the Canadian firm, increasing the price per share of Canadian Royalties to $0.80 and of Canadian’s 7 per cent convertible senior unsecured debentures to $800 per $1,000.

The new deal is in sharp contrast to Jien Canada’s initial offer made in August. Jien Canada is the joint venture formed by Jilin Jien Nickel Industry and Goldbrook Ventures Inc (TSXV:GBK), a Vancouver-based base metals explorer with operations in Quebec.

Not one to let go, Jien has said its offer is the best available option, despite claims by some debenture holders that they should be paid off in full before equity holders get anything.

At stake is the Canadian Royalties’ Nunavik nickel project near Xstrata’s Raglan mine, which according to a feasibility study done as far back as 2007, had shown the property containing reserves of 11.3 million tonnes averaging 0.97 per cent Nickel, 1.13 per cent copper, 0.05 per cent Cobalt plus platinum, palladium and gold values in several deposits.

An estimate of the total measured and indicated resources made in mid-October 2009 was 21.9 million tonnes grading 0.93 per cent Ni, 1.15 per cent Cu, 0.04 percent Co, plus precious metals.

Investors want priority

A spoke in the wheel came in the form of Jaguar Financial, an investment firm that had marshalled several investors into not tendering to Jien Canada’s offer.

Jaguar holds seven per cent of convertible debentures due at the end of March 2015. The firm described Jien’s offer as “oppressive and disrespectful” and wanted debenture holders to receive all of their principal plus a one per cent premium, not 80 cents on the dollar as proposed by Jien.

The firm categorically warned that it would try to block the deal. Not only did they turn the other way, the small merchant bank also said it was contemplating a superior offer for some of Canadian Royalties debtors.

To which, Canadian Royalties retaliated by charging Jaguar of disseminating “misleading information.”

Miffed

The institutions did stay away. Before the offer, three entities, two from Quebec and one from Australia, had agreed to tender. Those three institutions owned $78.873-million of the debentures – or 57 per cent of the outstanding.

On its part, Jien said though a majority of the Royalties shares and convertible debentures were tendered under its offer by October 27, the total did not add up. The date has since been extended.

Canadian Royalties shares closed at 66 cents Friday on the Toronto Stock Exchange.

In the event that Jien Canada loses and debenture holders then convert their stake to equity, common shareholders are set to face massive dilution.

As for how this offer is going to pan out, continue to read this section.

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Nickel prices have increased 58 per cent so far this year to $18,500 a tonne, but are still around 64 per cent below a record high of $51,800 hit in May 2007.  With miners reporting operating results, the nickel sector is set to see a major churn.

Russian metal company Norilsk Nickel, said on Friday it had cut its nickel output forecast for 2009 to 284,000 tonnes from 285,000-300,000 tonnes.

The company said its output of nickel declined in the first nine months of this year to 207,454 tonnes from 218,474 tonnes in the same period a year ago.

The fall was due to repairs at its Harjavalta plant in Finland in July and August and a halt at its Australian assets.

In the third quarter of 2009, the Harjavalta nickel refinery in Finland produced 3.7 thousand metric tonnes of nickel, including 3.3 thousand metric tonnes of own saleable nickel and 0.4 thousand metric tonnes of tolled nickel.

Even while painting an optimistic outlook for the global economy and demand for its products, Brazil’s Vale mining company said in its earnings release that it sold just $31 million worth of nickel products in the third quarter, down from $79 million in the second quarter, due to an ongoing strike at its operations in Sudbury, Ontario.

Vale, which reports in US dollars, said Wednesday night its net profit dropped by 65 per cent to $1.68 billion in the third quarter as demand for iron ore remained weaker than last year, while revenue dropped 43 per cent to $6.89 billion.

Vale bought Sudbury, Ontario-based Inco Ltd for $19 billion in October 2006.

Its Canadian operations now include six nickel mines, a mill, a smelter and a refinery in Sudbury; a refinery in Port Colborne, Ontario; a nickel-cobalt-copper mine in Voisey’s Bay, NL; and three nickel mines, a mill, a smelter and a refinery in Thompson, Man.

The company said it spent $209 million in the third quarter on idling its Canadian nickel operations.

Another firm dealing with its troubled Ambatovy nickel project in Madagascar, Sherritt International Corp (S:TSX) said lower commodity prices and the loss of an oilfield in Cuba sent its third-quarter profit down 58 per cent to $55.9-million.

The diversified resource company said Wednesday its profit amounted to 19 cents per share in the third quarter, down from $133.1-million or 45 cents per share a year earlier.

Sherritt’s revenue fell to $389.6-million from $478.3-million in the third quarter of 2008. As of the end of September, Sherritt’s long-term debt was $3.4-billion, of which about $2.1-billion was related to theAmbatovy nickel project,  which is scheduled for mechanical completion by year-end 2010.

Indonesia’s state-owned miner PT Aneka Tambang Tbk (ANTM.JK), posted a 56.7 per cent fall in its third-quarter net profit, hit by lower nickel prices from a year ago.

Antam, which has a stock market value of $2.26 billion, had previously said it expected to sell more gold this year, above its target of 9 tonnes, to compensate for lower revenue from nickel sales.

Antam plans to develop a third gold mine on Java in addition to its Pongkor and Cibaliung mines, lifting the firm’s output by 40 per cent, or 2 tonnes a year.