China's Minmetals makes $6.5bn bid for Equinox

Minmetals resources, the state-backed Chinese metals trader, surprised the markets yesterday by tabling a $6.5bn (£4bn) bid for Equinox Minerals, the dual Canada and Australia-listed group which has been vying to take over Canada's Lundin Mining.

The proposal, which is conditional on Equinox dropping its pursuit of Lundin, is the latest in a series of moves by Chinese companies to secure resources to satisfy the country's growing appetite for metals. In this instance, Minmetals is believed to be after Equinox's copper assets in Zambia and Saudi Arabia, a valuable resource for China, which accounts for 40 per cent of global copper demand.

The bid, which is pitched at C$7 (£4.50) per Equinox share, represents a 23 per cent premium to Equinox's closing price in Toronto at the end of last week and, if successful, would go down as China's fourth-biggest overseas deal on record.

News of the offer drove Equinox's shares beyond the Minmetals offer price, indicating that the market may be eyeing the prospects for a rival bid. Despite the share price reaction, analysts were quick to highlight that prospective suitors would face an uphill challenge in taking on China's financing might.

"Ultimately, no one wants to get into a bidding war with Chinese-related parties, given that Chinese companies are perceived to have a lower cost of capital relative to Western companies," said Tim Schroeders, a fund manager at Pengana Capital.

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