China's Cathay resumes pursuit of Discovery Metals

According to a regulatory filing, the new proposal is worth A$170-195 million or A$0.35-0.40 a share. However, CFC claims the price is not binding and could be revised.

CFC, which is 75%-owned by Chinese billionaire Yong Yu and 25%-owned by the China-African Development Fund (CAD), had made a cash offer to acquire the company for $830 million, at A$1.70 a share, in October last year.

The deal would have seen CFC acquire all outstanding shares in the company but the offer was rebuffed as inadequate by Discovery, prompting CFC to go direct to the shareholders. The bid was later abandoned in February due to concerns with information included in previous disclosures by Discovery.

The two companies clashed again in April when CFC, the biggest shareholder in Discovery with a 13.7% stake, refused to back a A$75 million equity fundraising effort and said the company should seek a strategic buyer.

Shares in Discovery, which have been suspended since the middle of April, fell 41% to A$0.20 after they resumed trading yesterday. This has put added pressure on the finances, with the company admitting it had breached the terms of its banking covenants and revealing gross debts of A$176 million.

Discovery has appointed UBS and Credit Suisse advisers to run a sale process and has started discussions with a number of potential bidders. The company added that it had set a deadline of June 10 for binding proposals.

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