Are Norilsk Nickel and Xstrata Also Interested in Scandinavian Minerals?

First Quantum Minerals Ltd.[FM/TSX] is paying a big premium for Scandinavian Minerals Ltd. (SCANF.PK)- 41.3% above its April 18 closing price. But will that be enough to deter rival bids?

Maybe not, according to Canaccord Adams analyst Orest Wowkodaw. He thinks there is a "greater than average probability" of another bidder emerging, with Norilsk Nickel (NILSY.PK) and Xstrata PLC (XSRAF.PK) the most likely candidates.

Those two companies would be most interested because Scandinavian has not signed any off-take agreements for its nickel output from the Kevitsa project in Finland, and they both have nickel smelters in Europe and want to expand production.

In a note to clients Mr. Wowkodaw wrote:

Given its location, lack of off-take arrangement, and the increasing scarcity of large quality nickel sulphide projects, Kevitsa would appear to be an extremely attractive asset to both companies.

He maintained a "buy" rating on the stock and raised his target to C$12.50 a share (from C$10.50). First Quantum's cash-and-stock offer is valued at C$9.89.

Mr. Wowkodaw wrote:

We believe a major could afford to pay up to around C$15.50 per share... for Scandinavian in a heightened takeover battle.