Antofagasta Confirms Not in Merger Talks With Teck Resources

By Alex MacDonald

LONDON--Chilean copper producer Antofagasta PLC (ANTO.LN) confirmed Tuesday that it is not in merger talks with Canada-listed Teck Resources Ltd. (TCK.B.T.) regarding a possible merger of the two miners.

Teck on Monday said that it wasn't in merger talks following a report that the two miners had held early-stage talks about a deal that would create one of the world's largest copper producers.

Teck said it "is not in discussions with Antofagasta in relation to any form of transaction, and there are no other corporate developments that justify any significant movement in its share price."

Teck is a major producer of steelmaking coal and copper, and zinc. It also has development projects in Canada's oil sands. Its market cap exceeds 11 billion Canadian dollars ($8.7 billion).

Antofagasta is a pure-play copper producer with four producing mines in Chile, some of which also produce molybdenum gold and silver as by products. Antofagasta has a market capitalization of GBP7.3 billion or $10.8 billion.

Citigroup mining analyst Alex Hacking said in a note that such a merger makes no apparent sense. "Our initial reaction to any potential deal is puzzlement, seeing no obvious benefits to Antofagasta," he added. Mr. Hacking said operating synergies from such a merger would be relatively small and diversification into coal and zinc for Antofagasta would risk the company's premium share value based on the fact that its a pure-play copper miner.

A merged company would have been the world's fifth largest copper producer with 738,000 of copper production last year. It would have had an enterprise value of about $25 billion, not enough to be ranked among the top five globally diversified major miners, but certainly in the ranks of second-tier firms such as Southern Copper and others, Mr. Hacking said.

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