CHICAGO - Directors of Sphere Minerals Ltd., Perth, Australia, said Tuesday they had accepted an off-market takeover offer for the company by London-listed and Zug, Switzerland,-based Xstrata plc for A$2.50 per share or a premium of 73% over the Sphere's 30-day volume weight average price and 61% over the Australian Securities Exchange price on Monday.
The acquisition for A$428 million (US$383) will push Xstrata, a nonferrous metal and coal miner, deeper into iron ore development by giving it access to three projects Sphere is developing in West Africa's Mauritania. Xstrata now has no producing iron ore assets but is currently exploring for iron ore in the Republic of Congo and late last year said it would built an iron ore extraction plant in Australia.
International mining companies have been rushing to line up iron ore projects in Central and West Africa, a region with what are seen as some of the last major unexploited deposits of the critical steel-making raw material.
Sphere's advanced stage projects are a large-scale 50:50 joint venture with state-owned Soci'et'e Nationale Industrielle et Mini`ere (SNIM) at Guelb el Aouj; a near-term project at Askaf, 35 kilometers south of Guelb el Aouj; and another project at Lebtheinia, 90 kilometers from the coast. Mauritania has been exporting iron ore since 1963 and all Sphere's projects are located near SNIM's existing iron ore rail and port infrastructure.
The acquisition of Sphere "will add a range of organic growth projects in iron ore to our portfolio," Peter Freyberg, Xstrata coal chief executive, said in a statement. "This includes potential near-term production from the Askaf project and longer term growth potential from the large-scale Guelb el Aouj project."
Sphere said last month it was planning to spend $540 million over the next five years to escalate development of the Askaf deposit and produce 2 million tonnes per year beginning in 2012 before increasing production by 2015 to 6 million tonnes per year. Mauritania produced 10.2 million tonnes of iron ore last year.
Freyberg described the purchase as bringing Xstrata Coal's bulk mining and project development capabilities together with Sphere's experienced iron ore professionals and track record in Mauritania. "Xstrata has the financial and technical capabilities to expedite the development of Sphere's greenfield projects and manage the inherent risks involved," he said.
