SUNDANCE Resources' $1.3 billion deal with China's Hanlong is effectively dead after the suitor failed to meet a crucial funding deadline, giving the junior an option to terminate the troubled agreement.
Hanlong had been widely tipped to fail to secure a credit-approved term sheet from its financiers, China Development Bank and China Everbright Bank, by yesterday's deadline.
Sundance confirmed to the market yesterday Hanlong missed the deadline, adding that both parties were now required to enter a five-business-day good faith consultation period, which concludes on April 3.
``If the parties fail to reach agreement during that period, either party may then terminate the agreement,'' the company said in its statement.
The Australian understands that Hanlong is seeking an extension to secure the term sheet but Sundance is unlikely to agree to such a move and instead will look to kill off the two-year long deal.
Hanlong's attempts to secure financing were thrown into doubt when it emerged last week its chairman, Liu Han, had been detained by Beijing police. Reports out of China have suggested Mr Liu was under investigation for harbouring a fugitive and other unspecified ``serious offences''. The Chinese police ministry also had announced the capture of his brother, a ``major murder suspect''.
Sundance is understood to have been working on an alternative plan to have other options, given the repeated delays by Hanlong in finalising the deal.
While the board believes its $5 billion Mbalam iron ore project on the border of the Republic of Congo and Cameroon will be backed by Chinese interests, there are other parties in the background keeping an eye on events.
Several investment banks are already believed to be preparing alternative options to present to the Sundance board. Investment banking sources said Sundance might need to consider a potential joint venture, rather than its preferred option of an outright sale. The change in the price of, and outlook for, iron ore since the original Hanlong offer was launched means that any alternative options are likely to be made at less favourable terms.
The Hanlong deal was originally proposed in July 2011 at 50c a share, but the Sundance board rejected the offer as too low before a revised bid at 57c was backed by the target in October 2011.
The price was then cut to 45c late last year when China's National Development and Reform Commission approved the bid, subject to the price being revised. The top economic planner, which Sundance said it remained in talks with, had approved the deal on the condition Hanlong secured equity and debt funding.
The delays to the deal have weighed on Sundance's share price, which was trading at 21c when the company suspended trading in its shares last Wednesday.
SDL Price at posting:
21.0¢ Sentiment: Buy Disclosure: Not Held
