Just watch OZ Minerals Limited (ASX: OZL) fly! The stock surged 12.1% this morning to a three-week high of $3.71 on takeover speculation.
This is above the $3.60 offer price that private equity firm Kohlberg Kravis Roberts (KKR) offered for a 10% stake in the copper miner after the stock crashed by more than 20% since May on the back of the commodity rout.
KKR upped its offer by 5 cents a share overnight and is believed to already own a less than 5% holding in OZ Minerals, according to the Australian Financial Review.
The news, follows a stunning 4% rally in the copper price to $US2.3410 a pound overnight as shares in Swiss commodities giant Glencore bounced for a second day. The share sell-off on Monday triggered a global market meltdown.
The copper price is also supported by reports that Chile's second largest copper mine Collahuasi announced that it will cut production by 30,000 tonnes.
The opportunistic move by KKR will bolster confidence towards the mining sector at a time when investor confidence towards the sector has hit a multi-year low on fears that there is too much supply of most hard commodities at a time when appetite from the world's largest commodities consumer China is waning.
KKR described OZ Minerals as a good undervalued company in an emailed statement reported on Bloomberg and OZ Minerals said it has no idea what KKR's intentions were.
But if you are hoping for an imminent takeover bid for OZ Minerals, you may have to be more patient as there are reports that KKR is not intending on making an offer for the $1.1 billion market cap miner anytime soon.
However, private equity firms are not known to make strategic investments in companies where they do not control a majority stake and I don't think KKR will look to sit on its minority stake for long.
OZ Minerals is in play and this will put pressure on its board to find ways to keep its share price buoyant as that is the only way to keep corporate raiders at bay.
The takeover specuation is spilling over to other copper miners too. Sandfire Resources NL (ASX: SFR) is up 7.3% to $5.78 this morning while Talisman Mining Ltd. (ASX: TLM) is 5.3% higher at 40 cents.
This isn't the first notable corporation action among copper miners. PanAust Ltd was taken out by its major shareholder Guangdong Rising Assets Management in May this year.
Expect more corporate interest among mining stocks as valuations in the sector are very low as the market refuses to believe that commodity prices will ever recover.
KKR's move reminds us all that there is value in the sector as long as investors have an investment time horizon that extends for more than six months.