By Barry Fitzgerald
BEIJING does have a limit to the amount of cheap funding it will supply state-owned mining companies to secure overseas supplies of raw materials to feed its industrialisation and urbanisation boom, despite perceptions to the contrary.
This emerged yesterday in the surprise early withdrawal by Chinese state-controlled Minmetals Resources (MMR) from the bidding war for dual Canadian and Australian-listed copper producer Equinox.
Equinox workers in Zambia - the copper miner looks likely to be soaked up by the world's biggest goldminer.
The Hong Kong-listed MMR promptly dropped its $C6.3 billion ($A6.17 billion) hostile takeover bid for Equinox when Canada's Barrick Gold blew it out of the water with a friendly competing bid of $C7.3 billion.
MMR chief executive Andrew Michelmore said the price offered by Barrick for Equinox was ''above our most optimistic assessment of value''.
When MMR announced its bid on April 4, Mr Michelmore did his best to warn off counter-bidders by suggesting MMR's access to cheap Chinese financing gave it an advantage in any battle for control.
But MMR's equity raising for the tilt did not go to plan. It had yet to confirm debt financing for the initial offer, let alone for a counter-bid to Barrick.
Indeed, Barrick noted yesterday that because of historically low interest rates, its cost of funding was about as cheap as it gets, at a little more than 2 per cent.
Equinox believes that the $C8.15-a-share bid from Barrick is attractive, because it offers shareholders a significant premium for their shares in an all-cash deal that comes at a time of historically strong copper prices.
Barrick's entry into the fray was as much a surprise as the speedy exit of the Chinese.
It is the first time the historically acquisitive Barrick, the world's biggest gold producer, has made a takeover bid aimed at copper assets rather than gold.
Barrick's Equinox bid had some investors worried about the premium it was paying to beat the competition. Barrick shares fell 6.7 per cent in the Canadian market and there was also investor concern about the damage the copper-focused bid might have on the so-called ''gold premium'' that gold stocks command over their base-metal cousins.
But Barrick president and chief executive Aaron Regent would have none of that. He said the Barrick share-price fall on day one of the bid was not surprising.
''The key point that we have emphasised is that
this does not constrain our ability to grow the gold business at all. In fact, this is complimentary to that,'' Mr Regent said.
The agreed bid from Barrick is bitter-sweet for Equinox chief executive Craig Williams. He co-founded the company in Australia in 1994 and had a 15 per cent stake.
''Over the years we raised more than $1 billion to finance the projects and get to where we are. So unfortunately, over time, I've diluted down to well less than 1 per cent of the company,'' Mr Williams said.