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China firm planning to buy Noranda

Tuesday, September 28, 2004

MARSTON - It will be "business as usual" said local Noranda officials as they acknowledged the intent to sell the worldwide company's sale to a Chinese metal trader.

China's biggest metals trader, China Minmetals Corp., is seeking to buy Canada's biggest mining company, Noranda Inc., for more than $5 billion, the Associated Press reported Monday. Southeast Missouri's largest employer, Noranda Aluminum Inc. located in the St. Jude Industrial Park at Marston, would be part of that sale.

Keith Gregston, president and general manager of the Marston Plant, had no comment on the sale.

In a report from CNNMatthews, Noranda officials said the agreement to enter negotiations followed months of review of various proposals. The Minmetals proposal is subject to numerous conditions, including government approval.

Gordon Paterson, managing director and head of Asia Pacific investment banking at Citigroup, which is advising Minmetals on the deal, said the Chinese company hopes to sign a final agreement within a couple of months for the acquisition The deal would will also include taking on about $2.5 billion of debt. A combined price tag of at least $7.5 billion would make the Minmetals deal the biggest overseas acquisition by a Chinese company.

To date, Chinese companies have kept a low profile overseas, with China Netcom Corp a rare instance of a company acquiring businesses outside China. Netcom last year completed the acquisition of assets of Asia Netcom, formerly known as Asia Global Crossing, for about $1 billion, said Paterson.

The final price of the Noranda deal isn't known yet, said Paterson.

"It's a negotiated transaction and now we're doing due diligence," Paterson said.

The move will further strengthen Minmetals' position overseas, where it currently has 44 units in 17 countries and regions. It will also help Minmetals meet China's insatiable appetite for natural resources to stoke the country's rapid economic expansion.

Noranda, about 43 percent-owned by Canadian conglomerate Brascan Corp., is a major producer of copper, nickel, zinc, aluminum, with major mines in Canada and Chile and a 59 percent stake in Toronto-based nickel producer Falconbridge Ltd. It employs 15,000 people and has operations in 18 countries.

The Marston-based Noranda plant employs some 889 hourly and 230 salaried personnel who operate the plant 24 hours a day, seven days a week. During 2003, the local plant produced 538 million pounds of aluminum.

The four main product lines produced from the metal locally are: 1) Billet, which is used for the extrusion of windows, doors, furniture, automotive products; 2) Foundry, used to produce car and truck wheels; 3) Rod, sold mainly for the production of electrical products; and 4) Primary ingot, which is melted by customers and used to produce anything made out of aluminum.

Approximately 45 million pounds of aluminum are shipped from the local plant monthly with markets typically within one-trucking day from the plant, located just off Interstate 55 in New Madrid County.

Minmetals, which is China's biggest importer and exporter of steel, nonferrous metals and mineral products, said it handled 40 percent of the copper and half the alumina imported into China last year.

It also produces copper, aluminum and nickel as part of its recent efforts to become an integrated metals company. "China is a big consumer of metals, so it's a natural fit (for Minmetals)," Paterson said.

He said Minmetals would be focused on growing rather than consolidating Noranda's operations.

"Minmetals wants to retain the management and grow the business," Paterson said. "It'll allow Noranda to grow the business on their own, and to capture the benefits of supply and demand."

Also on Monday, the top executive at Brazil's Companhia Vale do Rio Doce SA said his company remains interested in acquiring Noranda if its exclusive talks with Minmetals break down.

"If they want to talk with us, we are there," Roger Agnelli, CVRD's chief executive officer, told reporters at the New York Stock Exchange.

But Agnelli stressed that CVRD, the world's largest iron ore producer and exporter, is "not in a rush" to buy Noranda or any other foreign mining companies even as it scouts for acquisition prospects.

"We are looking for opportunities around the world...but our main driver of growth is organic growth," he said.