An independent board committee of ASX-listed Canyon Resources, including nonexecutive chairperson Mark Hohnen, has recommended that shareholders reject an off-market takeover bid having been made by A2MP Investments.

A2MP currently controls 55.56% of Canyon through associates, however, on July 29 announced a conditional cash takeover offer to acquire all the Canyon shares it does not already own for A$0.05 apiece, which values the company at about A$103-million.

Canyon is developing the Minim Martap bauxite project in Cameroon, which is believed to be one of the world’s richest bauxite deposits.

Hohnen cites the reasons for the takeover rejection suggestion as being that the offer materially undervalues the company and is not fair nor reasonable to shareholders, particularly minority shareholders given A2MP’s existing controlling shareholding, and that the company would rather continue to pursue credible funding alternatives to advance the Minim Martap project.

In fact, the offer value of A$103-million is less that the capital having been spent to deliver first shipments from the project.

Further, the offer price of A$0.05 apiece represents a discount of 42% to Canyon’s closing share price of A$0.087 on July 28, a 47% discount to Canyon’s 30-day average share price of A$0.094 for the last 30 days and a 62% discount to Canyon’s average share price over the last six months.

Hohnen explains, moreover, that A2MP’s justification for the offer is founded on its assertion that changes in market conditions have materially and adversely impacted the economics and viability of Minim Martap. A2MP believes that lower product pricing assumptions, higher freight costs and increased capital requirements have materially reduced the value of the project.

The independent board committee has rejected these assertions, saying they need to be supported by sufficient independent analysis, not A2MP’s own analysis which lacks an independent technical study, updated feasibility study or expert reports.

In fact, Canyon cites an independent bauxite market review by CM Group in August as finding that long-term base case pricing assumptions (between $78/t and $86/t for premium 51% total alumina product and about 2% total silica grades) for Minim Martap continue to be supported.

Canyon has also managed to sign contracts for key operating cost inputs at lower prices than the assumptions made in the project’s definitive feasibility study.