Canico Resource Corp. yesterday endorsed a sweetened bid from Brazil's Companhia Vale do Rio Doce, marking the second time the Canico team has groomed a project to the point where a chequebook-toting suitor came knocking at the door.
CVRD's revised offer of $20.80 for a Canico share, or about $865-million, was enough of a bump from an original offer of $17.50 a share to persuade Canico to change its mind, president and chief executive officer Michael Kenyon said yesterday.
"It was enough for the board to agree to take a look at it, and with our advisers, agree that it was fair and equitable for our shareholders, so we accepted it," Mr. Kenyon said. Canico owns the Onca Puma nickel project in Brazil's Para state, where CVRD also has operations.
Onca Puma is considered one of the best undeveloped nickel projects in the world. CVRD is the world's biggest iron-ore producer, runs ports and railroads in Brazil and this year moved into nickel, announcing in July that it would spend $1.2-billion (U.S.) to build the Vermelho nickel mine, also in Para state.
With a market value of about $50-billion, CVRD is one of the biggest players on the global mining scene and plans to spend about $17-billion on new mines and projects by 2010. The Brazilian company was reportedly in the running to acquire Noranda Inc. last year before Noranda combined with Falconbridge Ltd.
CVRD was also named as a potential bidder for Falconbridge, currently in the sights of Toronto-based Inco Ltd.
CVRD announced its bid for Canico on Sept. 15. Canico said it was too low and held out for a better one.
In a directors' circular, last month, urging shareholders to reject the Brazilian company's offer, Canico described Onca Puma as a "global scale deposit," adding that if it were developed according to an August feasibility study, it would become one of the top 10 nickel mines in the world ranked by production.
The study outlined a project that would produce ferronickel, a nickel-iron mix, to be sold directly to stainless steel mills.
The revised offer represents a premium of about 53 per cent over the average trading price of Canico's common shares for the 30 days before CVRD's initial offer, Canico said yesterday.
The two companies have signed a support agreement that gives CVRD the right to match any offer made by another bidder.
The agreement also calls for Canico to pay up to $32.8-million (Canadian) if the deal does not go through.
The new offer closes Nov. 28 and is subject to at least 50 per cent of Canico's shares being tendered to the deal and other conditions.
Canico acquired Onca Puma in 2003 from Inco and has since been working to nail down the size of the resource and figure out how to bring it into production.
On the Toronto Stock Exchange yesterday Canico shares jumped $1.33 (Canadian) or 7 per cent to close at $20.74.