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Chinese investment in Australia is continuing apace, with copper and gold producer PanAust the second miner to receive a takeover bid from Chinese shareholders in a week.
PanAust confirmed on Tuesday that its major shareholder with 22.8 per cent, Guangdong Rising Assets Management, had offered to buy all remaining shares in the company for $2.30 a share.
The offer valued PanAust at $1.46 billion, well above the $1.58 a share the stock closed at on Monday.
The offer prompted a 54¢ rise to $2.12 by close of trading, still well below the offer price.
But PanAust directors said they could not support the bid, with managing director Gary Stafford pointing to recent copper acquisitions in Australia as evidence that Guangdong’s offer was not sufficient. In particular, he pointed to Rio Tinto’s sale of the Northparkes mine, which annually produces about 40,000 tonnes of copper, to China Molybdenum for $US820 million.
PanAust expects to produce up to 75,000 tonnes of copper this year and has growth under way to be producing 90,000 tonnes within five years. It also has two big development projects in the wings, with Chile’s Inca D’Oro on the drawing board and a preliminary deal with Glencore Xstrata to buy its Frieda River deposit in Papua New Guinea.
”Companies that have a strategic need are paying a far higher price for copper than is reflected in the equities of copper companies,” Mr Stafford, PanAust’s 13th biggest shareholder with 0.43 per cent, said.
He described the bid as opportunistic but said talks were constructive, with Guangdong welcomed in to perform due diligence.
PanAust’s sixth-biggest shareholder and founding director, Bob Bryan, said while the company deserved a higher offer, the bid was encouraging. ”There is obviously an appetite and appetites are to be encouraged in most situations and this is such a situation,” he said.
”It gives me a lot of confidence … the managing director has such a significant shareholding in the company and that means his interests will be well aligned with the rest of us shareholders.”
The offer is conditional on approval from Chinese and Australian regulators and more than 50.1 per cent of PanAust shareholders accepting the deal.
UBS analyst Jo Battershill said the offer looked ”a bit cheap” based on PanAust’s production settings, and much cheaper when the growth potential of Frieda River and Inca D’Oro was taken into account.
”[Guangdong] have come in with a bid that looks reasonable to people who haven’t followed the story or who just look at the share price chart, but it feels to me they are trying to get ownership of the company before the Frieda River asset comes in and they have to pay for Frieda River,” he said.
The bid comes just two months after Mr Stafford announced his intention to step down as managing director and as the company enters a phase of high waste movement at its flagship operating mine in Laos.
Mr Battershill said the bid was timed to lob at a moment when PanAust was in ”limbo period”, with its growth projects still more than a year away from a final investment decision.
The deal follows last week’s takeover bid for Aquila Resources by Chinese steel maker Baosteel in partnership with Aurizon. Aquila directors are yet to say whether they will recommend or reject the bid.
- Guangdong Rising Makes Bid for PanAust in $1.4 Bln Deal Highly Cited–Bloomberg