Darcy Keith
RTGAM



Equinox Minerals Ltd. continues to trade above China Minmetals Resources Ltd.'s $7-per-share takeover offer, as investors bet the $6.3-billion in cash put on the table won't be enough.

Canaccord Genuity analyst Gary Lampard believes that's pretty wise thinking. He doesn't advise betting that another rival bid will emerge for Equinox. But he does see good reason to believe the Chinese will have to pay more to convince shareholders to go along with the offer.

China's deep pockets, low cost of capital, and hunger for commodities to feed its surging industrial growth will probably mean it won't have much problem outbidding Western companies in any bidding war, analysts have stated.

Mr. Lampard also notes a precedent that was set back in 2009 in China Minmetals' acquisition of assets from Australian miner OZ Minerals. To be successful, it had to offer a 14 per cent sweetener (as well as exclude assets from an initial $2.6-billion (Australia) takeover offer for the company because of national security concerns.)

"Given the strategic value to China of resources acquisitions, we do not expect to see a rival bid for Equinox. However, we do see the case for a higher offer price," he said.

Upside: Mr. Lampard raised his target price to $8 from $6.75, although he downgraded the stock to a "speculative buy" from a "buy."

The rise in his target price comes despite lowering his expectations for the price of copper . In 2011, he now sees an average price of $4.42 (U.S.) per pound, falling to an average of $4.38 in 2012. That cuts his 2011 earnings before interest, taxes, depreciation and amortization estimate to $921-million from $1.042-billion, and his 2012 estimate to $1.125-billion from $1.274-billion.