Kagara bid beholden to a Hong Kong mystery mob Barry FitzGerald October 18, 2010
COPPER resources are more valuable than ever thanks to the red metal's charge to more than $US3.80 a pound and forecasts that supply deficits are on the horizon. It's against that backdrop that zinc/copper miner Kagara (ASX: KZL) has made an 11�-a-share or $14.3 million bid for Copper Strike (ASX: CSE), owner of the Einasleigh copper project in north Queensland.
Copper Strike has rejected the bid as opportunistic and is getting some support on that front from the market where its shares last closed at 12.5� a share, even if Kagara has its foot on 17.2 per cent of Copper Strike and is the logical owner of Einasleigh, thanks to its Mt Garnet and Thalanga processing facilities in the region.
But buyers at 12.5� a share obviously think Kagara's bid is on the light side. They need go no further than the recent update on Einasleigh's June 2009 feasibility study for some encouragement. Advertisement: Story continues below
A $108 million development of the project would generate a net present value of $151 million at a 10 per cent discount rate, if you were to assume $US3.30-a-pound copper and a US90� exchange rate ($A3.66 a pound compared with $A3.83 a pound now).
That could be enough to fend off Kagara's 11�-a-share bid. But Garimpeiro's interest today is in what opposition Kagara could face from a mystery shareholder on the Copper Strike register.
A group hidden behind Citicorp Nominees held 90,000 Copper Strike shares in June 2009 but, by late January, that had increased to 9.19 million shares or about 7 per cent of Copper Strike. Attempts by Copper Strike to trace the beneficial ownership of the shares led to UBS AG Hong Kong, which has not responded to further inquiries as to the ownership.
Our toothless tiger, the Australian Securities and Investments Commission, would not join the hunt. So how will the ''mystery'' Hong Kong shareholder respond to the Kagara bid? Is it a mainland-China metals group? Or is it just a Hong Kong-based fund? Who knows?
Given the Kagara bid is conditional on 90 per cent acceptance - unless waived - a 7 per cent stake in Copper Strike could easily become a blocking stake, or a launch pad for a counter-bid.
What is known is that if ASIC had pursued the beneficial matter as it should have, investors would not have been left with all this guesswork.
CSE Price at posting:
12.5¢ Sentiment: Hold Disclosure: Held
(20min delay)