2nd UPDATE: Zijin Mining Launches A$545 Million Bid For Indophil

Chinese gold producer Zijin Mining Group Co. Ltd. (2899.HK) said Monday it is making a A$545 million friendly takeover bid for Indophil Resources NL (IRN.AU) that will give it a stake in the US$5.2 billion Tampakan copper-gold project in the Philippines.

Indophil said its directors have recommended the offer, which is pitched at A$1.28 a share and represents an 18% premium to the last trade in Indophil shares and an 83% premium to their average price over the past six months.

Indophil's biggest shareholder and Tampakan's majority owner, Xstrata PLC (XTA.LN), has entered into a pre-bid agreement with Zijin which gives the Chinese group control of its 19.99% holding, subject to a higher offer emerging.

The deal would give Zijin, China's biggest gold producer, a 34.2% stake in Tampakan with the right to up this to 37.5%.

Indophil Chairman Brian Phillips said the deal unlocked value for Indophil's shareholders and was a positive for the project as Zijin was well placed to fund its share of the US$5.2 billion development.

"The Zijin proposal recognizes Tampakan's inherent value and follows a comprehensive ownership review process in which the board, management and advisers have considered a range of strategic alternatives and proposals from interested parties," he said in a statement.

Xstrata Copper Chief Executive Charlie Sartain said Zijin's offer clearly demonstrates the attractiveness of the Tampakan project.

"Xstrata welcomes the introduction of a joint venture partner with the capacity to support the advancement of the Tampakan project," he said in a statement.

Tampakan has an estimated mineral resource of 2.4 billion metric tons of ore containing 13.5 million tons of copper and 15.8 million ounces of gold.

A feasibility study into the project is due to be completed in the second quarter of 2010 with first production planned in 2016.

Indophil said that, based on current estimates, Tampakan is expected to have an average annual production rate of 340,000 tons of copper and 350,000 ounces of gold in its first 20 years of operation.

A takeover bid by Xstrata for Indophil, also pitched at A$1.28 a share, was last year rebuffed by the target company's board.

The Zijin offer is conditional on the bidder winning a 90% stake in Indophil and on receipt of Australian and Chinese regulatory approvals.

Australia's Foreign Investment Review board had previously approved both Xstrata's bid for Indophil and a rival proposal backed by Hong Kong merchant bank Crosby Capital Ltd. (8088.HK) and approval of Zijin's bid looks unlikely to be a barrier to the deal, given the asset is in the Philippines.

-By Alex Wilson, Dow Jones Newswires; 61-3-9292-2094; [e-mail]