LONDON--Chilean copper producer Antofagasta PLC (ANTO.LN)
confirmed Tuesday that it is not in merger talks with Canada-listed
Teck Resources Ltd. (TCK.B.T.) regarding a possible merger of the
two miners.
Teck on Monday said that it wasn't in merger talks following a
report that the two miners had held early-stage talks about a deal
that would create one of the world's largest copper producers.
Teck said it "is not in discussions with Antofagasta in relation
to any form of transaction, and there are no other corporate
developments that justify any significant movement in its share
price."
Teck is a major producer of steelmaking coal and copper, and
zinc. It also has development projects in Canada's oil sands. Its
market cap exceeds 11 billion Canadian dollars ($8.7 billion).
Antofagasta is a pure-play copper producer with four producing
mines in Chile, some of which also produce molybdenum gold and
silver as by products. Antofagasta has a market capitalization of
GBP7.3 billion or $10.8 billion.
Citigroup mining analyst Alex Hacking said in a note that such a
merger makes no apparent sense. "Our initial reaction to any
potential deal is puzzlement, seeing no obvious benefits to
Antofagasta," he added. Mr. Hacking said operating synergies from
such a merger would be relatively small and diversification into
coal and zinc for Antofagasta would risk the company's premium
share value based on the fact that its a pure-play copper
miner.
A merged company would have been the world's fifth largest
copper producer with 738,000 of copper production last year. It
would have had an enterprise value of about $25 billion, not enough
to be ranked among the top five globally diversified major miners,
but certainly in the ranks of second-tier firms such as Southern
Copper and others, Mr. Hacking said.
Write to Alex MacDonald at alex.macdonald@wsj.com
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