Mining PRs and the Ottotrans™: Part Two

By popular demand (this note last week made a few people laugh and say 'do it again Otto'), we apply the Ottotrans™ to another mining company press release and convert BizEnglish into RealEnglish. Today's example is the PR sent out by Frontera Copper (FCC.to) yesterday. This it what it says....

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TORONTO and PHOENIX, AZ--(MARKET WIRE)--Feb 15, 2009 -- Frontera Copper Corporation ("Frontera" or the "Company") today announced that its Board of Directors has unanimously recommended that shareholders tender their shares to the offer made by Invecture Group, S.A. de C.V. ("Invecture") to purchase all of the outstanding common shares of Frontera at a cash price of Cdn$0.75 per share ("Invecture Offer").

The Board determined that the Invecture Offer is superior to the Cdn$0.65 per share offer previously received from Southern Copper Corporation ("SCC"). Under the terms of the support agreement executed between SCC and Frontera, SCC had the right to match a superior offer, but did not exercise its right within the stipulated five calendar-day period. The Company's financial advisor, RBC Capital Markets, has provided an opinion that the consideration offered pursuant to the Invecture Offer is fair, from a financial point of view, to Frontera shareholders.

The enhanced offer from Invecture represents a 15% increase from the offer received from SCC and a 27% improvement in price compared to the original offer received from Invecture in early December. Completion of the process of identifying and engaging other potential acquirers has resulted in the unanimous determination by the Board that under present economic conditions, acceptance of the Invecture Offer is in the best interests of all shareholders of the Company.

Under the terms of the Invecture Offer, Frontera shareholders may tender to the Invecture Offer up to 4:30 PM Pacific time on Tuesday, February 17. Shareholders are encouraged to review the document titled "NOTICE OF VARIATION AND EXTENSION" filed by Invecture on February 6 and posted on SEDAR for more information.

ABOUT FRONTERA COPPER CORPORATION

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....and this is what it means:

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TORONTO and PHOENIX, AZ--(MARKET WIRE)--Feb 15, 2009 -- Frontera Copper Corporation ("Frontera" or the "Company") today announced that its Board of Directors has no choice but to recommended that shareholders tender their shares to the offer made by the opportunistic bastards at Invecture Group, S.A. de C.V. ("Invecture") to purchase all of the outstanding common shares of Frontera at a cash price of Cdn$0.75 per share ("Invecture Offer").

The Board worked out all by itself that Cdn$0.75 is more than the Cdn$0.65 per share offer previously received from Southern Copper Corporation ("SCC"). Under the terms of the support agreement executed between SCC and Frontera, SCC had the right to match a superior offer, but left us hanging. When the Company's financial advisor, RBC Capital Markets, had stopped laughing at us it provided an opinion that the consideration offered pursuant to the Invecture Offer is a total crock but it's all Frontera is going to get.

The miserly but slightly better offer from Invecture represents an 85% drop from the $5 prices of this time last year and a 62.5% drop from the share prices of September 2008. At least PCU got them up 27% from the first offer and saves our face a bit. Completion of the process of identifying and engaging other potential acquirers has resulted in the unanimous determination by the Board that under present economic conditions, those Invecture swines have got us by the short and curlies. For one thing, the Board holds less than 1.5% of stock and can't protect itself.

Under the terms of the Invecture Ripoff, Frontera shareholders may tender to the Invecture Offer up to 4:30 PM Pacific time on Tuesday, February 17. We know that they won't, but shareholders are encouraged to review the document titled "NOTICE OF VARIATION AND EXTENSION" filed by Invecture on February 6 and posted on SEDAR for more information.

ABOUT FRONTERA COPPER CORPORATION

Mining market thoughts

Dorato Resources (DRI.v) saw more insider selling last week. Today somebody somewhere sold 350,000 shares at $0.57. That's a long way off the $0.80 that Bedoya sold his second lot of 35k for last week. Last one to leave turn the lights out, please.

Interesting action in Chariot Resources (CHD.to), up 10% to $0.17 on high volumes. Last week the President of Shougang Mining met with Twobreakfasts and assured him and the rest of Peru that Shougang was pressing ahead with its $1Bn expansion project. The thing is that Shougang's mine is right slap bang next door to CHD.to's Marcona project; in fact CHD.to bought the land from Shougang in the first place. So why the sudden interest in Chariot today? I dunno, but the pieces fit a larger puzzle.

Frontera Copper (FCC.to) is now the centre of a bidding war, which can only be good for those holding (e.g. reader AS) and the wider sector. Mexican group Invecture had been outbid by PCU's 65c offer on Feb 4th, but today's upped $0.75 offer for FCC.to. adds fun to the scene. Let's see if PCU comes back at them. The stock has been trading at $0.79 and $0.80 today, so the market expects more action yet. Will they get it? I dunno. If you own, hold 'em. If you don't, and you want to, be careful about your entry point.

Gold Resource Group (GORO.ob) is at $4.60 right now. All very nice for the holders, but it gives me a chance to show my own failings as an analyst. In an October NOBS report I put a target on GORO.ob of $3.92 with gold at $900/oz (and silver $14). Here we are close to that spot gold number and the stock has shot way past my target. I even mentioned it here on the blog a few weeks back when it stood at $3.78 and mused that it was getting ahead of itself and maybe it was profit-taking time.

This is a good example of one of my major weaknesses in calling stocks, something I've battled with for a long time. As a value-based investor that calls targets based on fundamental analyses I find it tough to layer on market psychology and sentiment to my targets. I still think that GORO.ob is ahead of itself here, but that is no disguise to the fact that my "take profits" call at sub $4 prices totally sucked. Just another reason why I really mean it when I write "DYODD". After all is said and done, I'm just a dude with a blog.

Chart of the day is............

....spot copper again...unfortunately.

Copper is again making headlines for the wrong reasons. Last week I said in this early morning post that if Cu held $1.72/lb it would have been good. Just a few hours later I noted the metal at $1.69/lb and said "That's not good people."

And so it has proved, with the feted-for-24-hours Chinese stimulus (which contrary to rumour is not some sort of battery operated device you can order online) not convincing Mr. Market about anything. Note that oil is under $60/bbl right now, as well.

Real world impact too, as this morning Frontera Copper (FCC.to) has announced it is suspending mining at its Mexican copper operation "Piedras Verdes" (literally 'green stones', and makes sense if you know what copper minerals look like in the field). Away from Spanish lessons, FCC.to says it is continuing with leaching operations in order to generate cash flow. This will probably go down like a lead balloon with the mining workforce who have likely been pushed hard in the last few weeks to stockpile ore next to the leach pads, but hey...it's kapitalism, baby.

So where does copper go from here? To be honest I don't have a clue, but I'm quite sure pricing until the end of the year will be more as a function of the US dollar's fluctuations and much less aboout real supply and demand issues.