PERTH (miningweekly.com) – The directors of takeover target Cape Alumina have backed a takeover offer by fellow-listed MetroCoal, advising shareholders to accept the offer.

In August, MetroCoal launched an off-market takeover offer for the remaining 43% in Cape Alumina shares, which it failed to secure in its first takeover attempt in March this year.

Under the new offmarket offer, MetroCoal is offering Cape Alumina shareholders one of its own shares for every 1.3 Cape Alumina shares held, with the offer representing a 35% premium to the 20-day volume-weighted average price of Cape Alumina shares.

MetroCoal also in August provided Cape Alumina with A$250 000 debt financing to progress its flagship Bauxite Hills project, in Queensland.

In advising its shareholders to accept the offer, Cape Alumina said on Monday that the takeover offer was both fair and reasonable, and that the combined company would have a mix of value creation projects. The combined company would also have better access to funding and better prospects for developing the Bauxite Hills project.

The directors warned that Cape Alumina would have insufficient cash to effectively progress the development of the Bauxite Hills mine, at a rate and within a timeframe that would allow the company and its shareholders to benefit from the strengthening bauxite market without raising significant additional cash in the short term.

If the takeover bid was successful, the merged entity would hold extensive bauxite tenements in Cape York, including the Bauxite Hills project, as well as an interest in over four-billion tonnes of thermal coal in the Surat basin, and some A$6-million in cash.

The combined cash of both companies would provide short-term funding certainty for the Bauxite Hills project, and would place the combined company in a better position to advance the project and take advantage of favourable market conditions.

MetroCoal’s offer would close on October 3.