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Corriente may be sold to China's Tongling Nonferrous Metals

Ecuadorian officials say they have met with both Corriente Resources and Tongling Nonferrous Mettals executives concerning the sale of the Canadian junior to the Chinese company.

Author: Alonso Soto
Posted: Thursday , 26 Mar 2009

QUITO (Reuters) -

Corriente Resources Inc is near closing a sale deal with China's Tongling Nonferrous Metals, senior Ecuadorean officials with direct knowledge of the negotiations told Reuters on Wednesday.

Top government officials who meet with executives of Corriente and Tongling in Quito this week said the negotiations centred on whether Tongling would buy all or part of Corriente.

Corriente, which is listed and based in Canada but explores for copper in Ecuador, has a market capitalisation of around $365 million.

"They wanted to meet with us to review the country's laws," said the top official, who asked not be named because he was not allowed to speak publicly. "It is not certain if it will be a complete or partial sale."

Corriente issued a statement in which it said that "contrary to recent media reports, there are no material developments to disclose regarding ongoing exclusive negotiations for the potential sale of the company that were announced on December 16, 2008."

Corriente said at that time that the negotiation period would extend to March 31 but did not name the party it was in exclusive talks with.

Ecuadorean President Rafael Correa has said he wants major mining projects to progress as his OPEC nation has seen oil revenues plummet.

Correa, a U.S.-educated economist, this month lifted a nearly one-year ban on all mining operations that forced many small Canadian miners to leave the country.

Correa's socialist government has said four mining projects, including Corriente, are considered "investment priorities." The other projects include Kinross, IamGold and International Minerals.

Canaccord Adams in a research note to clients called Corriente a "prime takeover candidate" worth around $528 million, given the political risk in Ecuador.

Correa has sometimes threatened to end deals or seize assets of foreign companies to get benefits for his poor nation. Analysts predict tough negotiations with miners over royalties and more state control of projects. Environmental movements are also a source of tension with miners.

Last year Kinross bought Aurelian Resources for $815 million, drawn to the Fruta del Norte gold deposit in Ecuador.

Corriente is offering the government a cross-asset project that includes building a port, highways, hydroelectric plants and a metal refinery, according to a document obtained by Reuters. It said initial investment could be up to $3 billion.

"GUARANTEED INVESTMENT"

Ecuadorean officials said Tongling has signed a deal with Chinese constructor China Railway Construction Corp to finance mining projects in Ecuador.

China Railway and China Development Bank officials also participated in this week's meeting, officials said.

"We told them (Tongling) that as long they respect the legal framework and fulfill investment plans their overall investment is guaranteed in Ecuador," said a top mining official, adding that government authorization was not needed for the sale deal.

Chinese companies have been seeking assets overseas even as the global economic crisis has hurt mining takeover activity.

Corriente shares were up 4.2 percent to C$6.20 in afternoon trade on the Toronto Stock Exchange.

The company has not identified its suitor, but senior mining ministry officials in Ecuador said last year that China's Tongling nonferrous Metals, Xstrata and top copper producer Codelco were interested in Corriente's Panantza-San Carlos project.

Corriente's principal assets include an estimated 1.7 billion tonne copper deposit in Ecuador. ($1=$1.27 Canadian) (Additional reporting by Euan Rocha and Jeffrey Hodgson in Toronto; Editing by Lincoln Feast)