directors overseas takeover closer

Suitors fail to impress coal explorerBARRY FITZGERALD
September 5, 2009
A TUSSLE is under way between Indian and Hong Kong interests for control of the Canning Basin steaming coal explorer Rey Resources. However, neither of the competing bids for the Melbourne-based Rey is near the price range that could win an endorsement from the Rey board.

Indian-controlled Gujarat NRE Minerals started the ball rolling with what has become a hopelessly out-of-the-money offer of 9c a Rey share or one of its shares - trading at 60c a share - for every five Rey, giving the scrip offer an imputed value of 12c a share.

The trouble for Gujarat's offer is that Rey's shares have consistently traded at levels twice the value of the bid. Gujarat has, nevertheless, extended the offer until October 2.

However, Gujarat will have to think again now that the Hong Kong resources investment group Crosby Capital has made a cash offer of 19.5c a share for Rey.

The bid from Crosby comes with a 90 per cent minimum acceptance condition, a tough ask given Gujarat owns 16.6 per cent of Rey and the Rey board controls about 17 per cent.

Rey's key asset is its Canning Basin steaming coal project in the Kimberley region of Western Australia. It has outlined a 500 million tonne resource at its Duchess Paradise property and additional exploration has pointed to a much larger resource being present.

India is a big coal producer in its own right but it is getting worried that rising power consumption driven by rising living standards will leave it with an annual shortage of about 200 million tonnes from 2012.

India is just four days' sailing from the Kimberley coast. Crosby has presumably zeroed in on the same strategic potential of Rey's Kimberley project.

Rey shares closed 4.5c higher at 24c yesterday. The highest bid on the table - the Crosby offer - values Rey at $43.4 million.

Rey's managing director, Kevin Wilson, was not available for comment yesterday. He was travelling to London for discussions with some of the group's institutional shareholders.

In the meantime, Rey has told shareholders to continue to reject the Gujarat offers and to take no action on the offer from Crosby.

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