Discovery Metals rejects Cathay Fortune buyout offer

In a statement, the Discovery board said the proposed price of A$1.70 per share was inadequate and didn't reflect, in the context of a change of control, the value of the company's operations and expansion plans. Specifically, the board identified the strategic value of Discovery's main asset, the Boseto Copper project in Botswana, and the potential impact on value of the discovering of further copper reserves.

The board added that it would consider a new proposal from CFC and CAD, a fund established by China Development Bank to further the country's interests in Africa. CFC already owns 13.7% of Discovery and, had the initial bid been accepted, its holding would have risen to 75%, with CAD taking the remainder.

Last week's bid equated to a 17% premium to Discovery's October 3 closing price, and was 51% over the volume-weighted average trading price for the previous month. The marker had been trading in the A$1.60 range over the intervening week, suggesting shareholders expected that the offer would be accepted.

The Boseto asset has an annual production capacity of 36,000 metric tons of copper, plus another 1.1 million ounces of silver. Unlike various other commodities, copper remains in high demand with prices up 22% year-on-year. The CFC-CAD bid is one of several attempts by international investors to secure copper supplies in politically stable Botswana. Investment has topped $10 billion over the last two years.

Another unusual feature of this proposed deal is that it involves a privately-owned firm with no active experience in mining operations - CFC's only exposure to the sector is a 34% in China Molybdenum. Chinese overseas acquisitions in the metals and minerals are dominated by state-owned enterprises (SOEs).

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• Topics
• Industrials
• Australasia
• Greater China
• Buyouts
• Australia
• China
• buyout
• Commodities
• China Development Bank