The market capitalization of Australian copper-gold explorer Indophil Resources N.L. (IRN.AU) more than halved Wednesday despite the company revealing it was in takeover talks with a number of groups after a failed Chinese bid.

Indophil shares plunged when they resumed trading after the collapse of a A$545 million buyout attempt by diversified Chinese miner Zijin Mining Group Co. Ltd. (601899.SH).

At 0441 GMT, Indophil shares were down 46 cents at 63.5 cents, a fall of 42%, having dropped by more than 50% just after the market opened. The slide gave the company a market capitalization of A$370 million, well below Zijin's offer.

Chris Brown, an analyst at RBS Morgans, said that the steepness of the fall was not unexpected, given the previous stop on the shares and their elevated level in the context of the former Zijin bid.

"When they went into the trading halt (in early June) there was a bid for them at A$1.28," he said. The collapse of the Zijin talks was announced on June 24 but the company extended the trading halt because of political problems in the Philippines, where Indophil's main asset is located.

The drop Wednesday took Indophil shares to their lowest level since August 2009, but the stock was not far below its volume-weighted average of 70 cents in the months leading up to the November announcement of talks with Zijin.

The Australian mining sector has experienced a wave of mergers and acquisitions activity in recent weeks, although most of the moves, such as Banpu PCL's bid to take over Centennial Coal Co. Ltd., are linked to the increased level of certainty around Australia's domestic mining tax regime.

Indophil's main asset is a 37.5% stake in the undeveloped Tampakan copper-gold project in South Cotobato province on the southern Philippines island of Mindanao.

The Tampakan deposit is one of the largest undeveloped copper-gold deposits in Southeast Asia-Pacific region, second only to Freeport-McMoRan Copper & Gold Inc.'s Grasberg mine in Papua New Guinea in terms of copper reserves.

It has 13.5 million tons of copper and 15.8 million ounces of gold, according to a December 2007 resource estimate.

Xstrata PLC (XTA.LN) subsidiary Sagittarius Mining holds the remaining stake in the project.

Another analyst, who did not wish to be named because of restrictions on talking to the media, attributed Wednesday's plunge in Indophil's shares to the exit of hedge funds that had bought into the stock in anticipation of the Zijin deal going through.

"The market hates uncertainty and with the cash bid off the table there's a lot of that," he said.

Uncertainty over the company's operations was compounded by the outgoing governor of South Cotobato, who last month proposed a ban on open pit mining in the province, and Indophil "has not been able to obtain clarity" on the issue since, the company said in a statement to the Australian Securities Exchange before the market opened.

The company cited new Philippines president Benigno Aquino as saying he would press for a compromise agreement.

The analyst said that any progress on Indophil's fresh takeover discussions would need to wait until the Philippine mining regulations were clarified.

"If those issues are resolved it's a terrific entry price, but if not the stock could weaken further," he said.

In its pre-market statement, the company said it had received "strong expressions of interest" from Chinese and other foreign groups since the termination of its agreement with Zijin.

The takeover talks fell apart last month after delays in Zijin receiving government approvals in China.

Indophil is now "progressing discussions with interested parties and has opened a data room to assist potential purchasers' due diligence enquiries", the company said.

"In some instances, confidentiality agreements are in place."

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com
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