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Instead of paying Goldman, China buys mine in Ecuador

Section: Daily Dispatches

From Reuters
Tuesday, December 29, 2009

CALGARY, Alberta -- Canadian mining stocks jumped on Tuesday after Corriente Resources Inc., which has a copper-gold project in Ecuador, agreed to be taken over by Chinese suitors in their country's latest bid for an international resource developer.

The C$679 million ($653 million) bid from Tongling Nonferrous Metals Group Holdings Co. Ltd. and China Railway Construction Corp. Ltd., announced on Monday, comes more than a year after Corriente started talks to sell the company.

Shares in Corriente were up 94 Canadian cents, or 12 percent, at C$8.49 on the Toronto Stock Exchange on Tuesday afternoon. With volume of more than nine million shares, the stock was the market's most active issue.

The suitors, under the name CRCC-Tongguan Investment, are bidding C$8.60 cash for each Corriente share.

"It's in line with a number of different valuations in the copper space over the last three to four years," Canaccord Adams analyst Wendell Zerb said.

Shares in Corriente have more than doubled in the past year, as political uncertainty in Ecuador has eased and the pieces of its Mirador project in Ecuador have slowly fallen into place.

Last month, the company said it received formal authorization from the Andean country's Ministry of Non-Renewable Natural Resources to restart all advance development work on the project.

"I think this company would have been taken out long before this if the political situation in Ecuador had been more favorable over the last 18 months," Zerb said. "That being said, this particular acquisition group has been doing extensive due diligence, so a lot of people had believed something like this was coming."

Early this month, Raymond James analyst Tom Meyer raised his target price for Corriente to C$7 a share from C$6.50, saying the removal of political barriers to mine development in Ecuador made the company a "plausible takeover target."

Other active miners on Tuesday included Guyana Goldfields Inc., up 11 Canadian cents at C$7.85, and Stornaway Diamond Corp., up 8 Canadian cents at 64 Canadian cents.

The bid for Corriente follows a slew of takeovers of Canadian-based firms by Chinese state companies that are flush with cash and hungry for resources.

Recent deals have included the C$200 million bid for mining developer Canadian Royalties Inc. by China's No. 2 nickel miner, Jilin Jien Nickel Industry, and Canada's Goldbrook Ventures.

In August state-owned PetroChina paid C$1.9 billion for a 60 percent stake in two planned projects owned by Athabasca Oil Corp. in the oil sands of northern Alberta. That was China's largest acquisition of oil properties in Canada to date.

For assets outside Canada, Sinopec, China's largest oil refiner, bought Toronto-listed oil explorer Addax Petroleum Corp. for $7.24 billion, gaining access to blocks in West Africa and Iraq.

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