TSX-V-listed Cornerstone Capital Resources has rejected dual-listed SolGold’s unsolicited proposal to acquire the company, arguing that it undervalues its business, and also called into question the timing of the proposed bid in the lead-up to the release of the preliminary economic assessment (PEA) of the Cascabel project, in Ecuador.

In a letter dated March 8, the Cornerstone board said that it rejected the proposed hostile bid without actually having received the formal bid from SolGold and laid into the company for a “consistent track record of delays”.

Cornerstone stated that the timing of the proposed bid was “highly suspect”, stating that it believed SolGold wanted to exploit inside knowledge about Cascabel prior to the release of the PEA and before material information was disseminated to the market.

A PEA for Cascabel – a major copper discovery that has attracted significant international interest – has been delayed to the second quarter of 2019, said Cornerstone, which has a 15% carried interest in the Ecuadorian company that holds the project.

It further stated that the proposed hostile bid would pre-empt Cornerstone’s ability to enter into a transaction with third parties, such as diversified major BHP, given a standstill that did not expire until October next year.

SolGold, which trades on the London and Toronto exchanges, previously said that it would take a proposed offer directly to Cornerstone’s shareholders, after that company’s board rejected its advances in “record time”.

SolGold is proposing an all-stock transaction of 0.55 a share for every Cornerstone share held, which it argues is a 20% premium to the takeover target’s share price. At current market prices, this will be about C$0.35 a share, or about C$226-million for all the outstanding common shares of Cornerstone.

Cornerstone chairperson Greg Chamandy said that the proposal undervalued the company. “A fact that has clearly been recognised by our shareholders with holders of approximately 59% of the outstanding common shares having now advised Cornerstone that they will not support SolGold’s proposed bid.”

Given that Canadian takeover rules require the majority of Cornerstone’s outstanding common shares to be tendered to a formal offer before any shares can be taken up, Cornerstone does not see how the hostile bid could be completed without sufficient shareholder support.