chart looking positive again, page-2

GBG glad they got out of SDL

Chart looking positive again today, might be seeing $2++ shortly

Valuation torpedoes Gindalbie merger Andrew Trounson | October 26, 2007

MINING magnates George Jones and Ken Talbot's plan to create a $2 billion iron ore company has unravelled after an independent expert was unable to adequately value Sundance Resources' deposits in Cameroon, effectively torpedoing a merger with Gindalbie Metals.

Mr Jones, former chairman of iron ore miner Portman, is chairman of both Gindalbie and Sundance, while Mr Talbot's Talbot Group is the largest shareholder in Sundance with a 19.9 per cent stake.

The would-be partners said they had abandoned the deal after consulting shareholders and after extensive due diligence. However, it is believed the lack of drilling at Sundance's Mbalam deposits in Cameroon, and the resulting uncertainty over the quality of the deposit, effectively scuppered the deal.

Sundance shares dropped 11.5c, or 15 per cent, to 61.5c, valuing it at $1.1 billion. Gindalbie shares gained 14.5c, or 9.7 per cent, to $1.63, valuing it at $831 million.

Sundance, which has about $80 million cash in the bank, would have been liable to pay Gindalbie a $15 million break fee if the merger collapsed due to either party soliciting a bid from another party.

The breakdown of the merger highlights the difficulty of valuing the resources of would-be iron ore producers.

In the wake of a hot iron ore market, investors are increasingly prepared to pay up for potential resources rather than actual resources.

The Australian reported on Monday that US-based Cleveland Cliffs, which acquired Portman in 2005, had been stymied from pursuing further acquisitions in the WA iron ore sector by uncertainty over the quality of resources.

The proposed merger had worried analysts who could see few synergies between Sundance's African project and Gindalbie's Mungada hematite and Karara magnetite iron ore projects in Western Australia.

Mr Jones said he was "disappointed" by the decision.

"Although I am disappointed with the decision of the respective boards not to proceed with the merger, I would like to express my full support for both boards and management teams and my strong belief in the quality of the iron ore projects being developed by both companies," Mr Jones said.

Sundance managing director Don Lewis said the company would continue to fast-track resource definition and feasibility studies at Mbalam.

"Today's decision does not in any way change this vision," Mr Lewis said.

Gindalbie managing director Garret Dixon said the development of Karara remained the company's first priority.

The Karara and other magnetite projects are set to be the driving force in Australia's iron ore industry in coming years.