JOHANNESBURG (miningweekly.com) – Western Australian gold producer Phoenix Gold on Monday confirmed that it had received an unsolicited takeover approach from one of China’s largest mining companies, Zijin Mining Group, which valued the company at about $47-million.
Zijin intended to offer $0.10 a share in cash for all the ordinary shares of ASX-listed Phoenix Gold that it did not already own.
The Phoenix offer is the Chinese company’s third deal in as many months. Zijin recently bought Australian gold miner Norton Gold Fields and has also made an offer for a 49.5% interest in a subsidiary of Canada’s Ivanhoe Mines, which owns a copper project in the Democratic Republic of Congo.
Phoenix said it had engaged in discussions with Zijin and its advisers over the weekend in an effort to secure a transaction that was in the best interests of Phoenix shareholders. However, the company said that Zijin was “unwilling” to improve the price under its proposed offer and, as a result, the Phoenix board formed the view that it could not recommend the proposed offer in its current form.
Phoenix said Zijin had sought an endorsement that the proposed offer would be recommended for acceptance by all shareholders, as well as deal protections, such as no-shop, no-talk, no due diligence, as well as a break fee clause.
In particular, the Phoenix board determined that it was “inappropriate”, on the basis of Zijin’s current proposed offer, to limit its ability to solicit and facilitate a superior proposal that could deliver greater value to Phoenix shareholders.
One of the conditions of the Zijin offer was that Phoenix shareholders vote against a proposal to proceed with a deal with Evolution Mining, which would increase its interest in Phoenix to 19.9%.
However, Phoenix said that given the market sensitive nature of Zijin’s proposed offer, together with the potential effect on control of the company that either the Zijin proposed offer or the Evolution strategic alliance would have, the Phoenix board was considering adjourning the general meeting, scheduled for Tuesday.
The Phoenix board further said it was “unanimous” in its view that shareholders should “take no action”, nor make any decision in relation to their shareholding until the board had an opportunity to fully consider the proposed offer.
Zijin, through various wholly owned subsidiaries, held 8.91% of Phoenix’s shares, but as a result of executing a prebid agreement with Geologic Resource Partners its interest increased to 17.9%. Zijin has stated its intention to vote against the Evolution resolution at the meeting. The company also said that Phoenix’s four largest non-interested shareholders had indicated their intention to vote against the proposed Evolution agreement and that the resolution was unlikely to proceed.
Subject to the proposed Zijin offer being made and becoming unconditional, Zijin said it intended to undertake an immediate operational review of Phoenix, its assets and financial position. In particular, Zijin would assess possible synergies from Phoenix’s Castle Hill project, in Western Australia.
The Castle Hill resource is estimated at 81-million tonnes at 0.94 g/t gold for 2.4-million ounces within the first 90 m of surface. Mineralisation at Castle Hill has been defined over a continuous strike length of 9 km and remains open in all directions.
Zijin also noted that other parties might attribute more value to exploration tenements on trend with the Zuleika shear zone than Zijin.
Zijin said it ascribed “little or no value” for the heap leach assets and intended to suspend these activities while the review was being completed.
The offer, if made, would be subject to a limited number of conditions including a minimum 50.1% acceptance condition and Foreign Investment Review Board approval.