[miningmx.com] – AN investment in iron ore and manganese projects in South Africa by Aquila Resources may be in doubt after an announcement today of a joint A$1.42bn bid for the Australian firm by Baosteel Resources and Aurizon.
Aquila was considering investing up to $480m in South Africa of which $180m would be on the proposed 1.5 million tonnes a year (mtpa) Avontuur manganese mine. Aquila said in the past that a further $215m to $300m was being proposed for investment on Thabazimbi, an iron ore prospect containing an estimated 37.1mt in measured resources.
Investment in the two projects was thrown into confusion prior to the cash bid by Baosteel and Aurizon, communicated to Aquila Resources by letter on May 3, after the South African government alerted the Australians to an overlapping prospecting right on its Avontuur project by Pan African Mining Development Company (PAMDC).
The matter was subject to an internal investigation by the Department of Mineral Resources (DMR), but was then complicated after PAMDC said it would pursue it own legal means to press home its prospecting claim.
Aquila Resources had previously said it would take the issue to court as it had had its mining right application accepted by the DMR and had been developing the prospect since about 2006.
Mike Halliday, country head South Africa for Aquila Resources, told Miningmx on March 12 that national elections in South Africa scheduled for May 7 might delay the hearing of the DMR’s internal investigation.
Aquila Resources announced today that Baosteel and Aurizon had jointly bid $3.40 in cash per share. The bid requires 50% acceptance and would, if successful, leave Baosteel with an 85% stake in Aquila with Aurizon holding the balance.
The bidders had in 2009 invested in Aquila via a strategic placement and at that time also entered into a ‘memorandum of strategic co-operation’ in regard to Aquila’s projects, including the West Pilbara Iron Ore Project.
Given that the primary interest in the proposed acqusition is control of the West Pilbara project, it would seem possible that any new owner of Aquila may fight shy of a prolonged, time-consuming legal battle in South Africa and where the potential new owners had less ties to the investment already made in the country.
It’s not unheard of that bidders paying a full price for a company would seek to recoup some of their investment by hiving off assets deemed non-core. Equally, Baosteel has a South African subsidiary company and office in the country where it sources nickel, chrome and manganese so it would be familiar with the local business landscape.
Aquila Resources said today that Baosteel and Aurizon would seek board approval for the bid, which they argued was at a share price not achieved by the company to date and with low risk of a counter proposal by another suitor. The bidders would also contact Aquila’s shareholders directly.
“Aquila will form an independent board sub-committee to consider and evaluate the proposal and any resulting takeover offer and will update shareholders in due course,” said Aquila’s chairman Tony Poli in an announcement.
