China-Canada partnership makes move on Nunavik Nickel Mine

A Chinese mining giant and a Canadian mining company are set to take over Canadian Royalties’ Nunavik Nickel Mine project.

Goldbrook Ventures announced August 7 that it had entered into deal with Jilin Jien Nickel Industry Co., Ltd. to make a $148.5 million all-cash takeover bid for Canadian Royalties Inc.

According to the terms of the unsolicited takeover bid, the companies want to acquire all shares of Canadian Royalties for 60 cents in cash per share.

A news release says this share offer is approximately 28.2 per cent over the closing price of current share price of 48 cents on the Toronto Stock Exchange.

Canadian Royalties were worth $4.25 a share in 2007, so shareholders still stand to lose money under this offer, which they have 35 days to accept.

The release says the offer gives Canadian Royalties’ shareholders an attractive opportunity to realize “substantial and immediate gains.”

“We have a strong understanding of the deposits and the potential production output of Canadian Royalties’ assets and believe that the premium paid is an accurate reflection of their true value,” said David Baker, Chairman and CEO, Goldbrook Ventures Inc.

But Canadian Royalties is telling its shareholders not to make any quick decisions about the offer— which Glenn Mullan, the company’s CEO said he knew nothing about until the August 7 news release.

Canadian Royalties said August 11 that its board will “carefully review and consider the offers” and then make a recommendation with the next 15 days.

“Until the offers are reviewed, the Board of Directors may determine not to comment further or speculate on any course of action that it may advise or take,” the statement says.

A company that wants to a makes an offer for another company usually first informs that company’s board of directors. A takeover offer is called “hostile” when a company makes an offer without informing the target company’s board beforehand or if the company’s board rejects the offer.

In this case, the move by Goldbrook Ventures and Jilin Jien on Canadian Royalties is considered to be a hostile takeover.

Jilin Jien is one of China’s largest producers of nickel, copper and cobalt sulphates. With profitable operations spanning exploration, mining, smelting, refining, and research.

Goldbrook has previously explored of properties around the Raglan area.

“The combination of Jilin Jien’s expertise, experience and financial resources, together with Goldbrook’s experience and expertise in operating in the Raglan district, provide the necessary elements to bring the Nunavik Nickel Project into production,” the news release says.

The collapse of the Nunavik Nickel mine project under Canadian Royalties was a casualty of the company’s legal disputes with its former partner, the decline in metal prices and bad economic times.

Before Canadian Royalties went into a tailspin, a May 2010 start-up for its project, which would be Nunavik’s second nickel mine, still seemed possible, but the company needed to raise $130 million for the $500-plus million project.

This proved impossible as the global financial crisis kicked in, metal prices declined and banks wanted to loan money only to the most financially-secure ventures.

Nickel is used in the manufacture of coinage and stainless steel— so when the economy slows, the demand for nickel also declines.

Nickel prices now stand at about $20,000 per tonne, but that’s still down from a high of more than $52,000 per tonne two years ago.

Cash-rich Chinese firms are now looking at snapping up mineral assets around the world, many of which have lost value during the recession.

This past June, Oz Minerals of Australia agreed to sell Nunavut’s Izok Lake and High Lake lead-zinc projects, along with six other mining properties, to China Minmetals, in a deal worth US $1.2 billion.