THE BOURSE WHISPERER: Sundance Resources has given the thumbs up to the proposal by Hanlong (Africa) Mining Investment Limited to acquire 100 per cent of the company for 57 cents cash per share via an Australian Scheme of Arrangement.
The deal values Sundance at $1.65 billion and represents a 65.3 per cent premium to Sundance’s Volume-Weighted Average Price (VWAP) in the one month leading up 15 July 2011, when Sundance received Hanlong’s initial proposal.
It also represents a 56.3% premium to Sundance’s three-month VWAP to the same time and a 32.6% premium to Sundance’s closing share price on 30 September 2011, the last day that Sundance traded prior to signing the Scheme Implementation Agreement.
In March, Hanlong became Sundance’s largest shareholder after acquiring all of the shares in the company previously owned by Ken Talbot’s estate.
The Mbalam iron ore project currently boasts hematite resources of 521.7 million tonnes grading 60.7 per cent iron and a further 2.3 billion tonnes of itabirite hematite resources at 38 per cent iron.
The project is forecast to produce 35 million tonnes per annum of Direct Shipping Ore-quality hematite for ten years in stage one, then continue production at 35Mtpa of itabirite hematite for at least an additional 15 years, generating an internal rate of return of 27% on an ungeared basis based on the DFS published in April 2011.
The development of the Mbalam project will include construction of a new deepwater port for the export of iron ore and heavy haulage railway connecting the mines to the port.
Sundance Resources chairman George Jones said he believed the offer was attractive to shareholders.
“After careful consideration, the Sundance Board has unanimously concluded that the offer represents an attractive price and provides shareholders with an opportunity to realise considerable value from their investment in Sundance,” Jones said in the company’s announcement to the Australian Securities Exchange.
“The offer values Sundance at A$1.65 billion compared with the company’s market capitalisation of approximately A$350 million in June 2010.
“This increase in shareholder value reflects the world-class attributes of the Mbalam iron ore project in the Republics of Cameroon and Congo and its potential to unlock a new iron ore province in West Africa.
“Hanlong’s offer means that the substantial financial support needed for this integrated port, rail and mine project will now be available, in the process realising substantial value for Sundance shareholders and immense benefits for the people of the Republics of Cameroon and Congo.”