[miningmx.com] — METOREX has sold its Sable Zinc processing plant in Zambia for a “base price’ of R190m, dealing with one of the issues that has delayed the proposed acquisition of the group by Brazilian resource giant Vale.
The disposal of Sable was one of the conditions precedent to the deal struck between Metorex and Vale on April 8, through which Vale made a cash offer of 735c per share for Metorex.
The offer is subject to approval by Metorex shareholders at an extraordinary general meeting, which will now be called for in terms of a circular to shareholders to be issued early next week.
One of the other conditions precedent was that all conditions had to be met or waived within 180 days from April 8.
Metorex chairperson Rob Still said: “The timetable has been delayed slightly so far by requirement to sell Sable at a price that added value for Metorex shareholders, as well as issues in complying with the new Companies Act.
“We are the first company to carry out a deal like this in terms of the new act and all the relevant players have had to familiarise themselves with the process.’
Metorex shares rose from around 530c immediately ahead of the Vale bid to trade briefly as high as 737c, but have since pulled back to current levels of around 720c.
There was initial market speculation that a competing bid for Metorex from a Chinese consortium was likely, but that has not materialised.
Asked about the possibility of a competing bid, Still replied: “The terms of the agreement with Vale are that the company and its directors cannot solicit another competing bid.
“However, should such a bid be made then the Metorex board would have to consider it in terms of its fiduciary responsibilities to Metorex shareholders.”
The terms of the sale of Sable to Glencore International are that the base price of R190m could be reduced by up to a maximum of R70m, should any potential liabilities affecting the operation be discovered.
The price may also be increased or reduced by changes in the audited net asset value of Sable between March 31 and the earlier of August 31 and the last date of the month in which all conditions precedent to the disposal of Sable are met.
Metorex will advance a R35m loan to Sable prior to its disposal. This has the effect of increasing the Sable “base price’ to R225m, because it has no effect on the Vale offer of 735c a share for Metorex.
It’s understood the reason for the fairly complex terms of the Sable deal is to meet Vale’s requirement that the asset be disposed of in such a way that there can be no subsequent comeback on Vale as and when it acquires Metorex.
Depending on the final price, the sale of Sable is worth between 20c and 30c per share to Metorex shareholders and will be distributed to them.
There has been considerable negative sentiment in the market about the Vale offer, suggesting the deal may be voted down at the shareholders’ meeting where a 75% vote in favour is required for it to go through.
This is because of a belief that the price offered is too low as well as that it’s too soon to sell the company, given the way business fundamentals have turned in Metorex’s favour.
Still told Miningmx on April 11: “We have no fundamental right as a board to say ‘no’ to an offer if it is above a certain level.
“We have to say to the bidder effectively “yes, we hear you’ and then our job as a board is to let the shareholders make their own decision on the offer.’
The writer owns shares in Metorex.
