Nick Evans Wednesday, 8 September 2010 FE Limited?s bid to acquire Padbury Mining is in doubt, with Padbury shareholders handing a thumping win to the incumbent board in today?s extraordinary general meeting and Fe chairman Tony Sage saying the likelihood of a new mining tax has also made the company a less attractive acquisition target.
Padbury shareholders comprehensively rejected a bid by dissident shareholder Denis McInerney to install Tony Sage and two other Fe Limited directors to the Padbury board today.
Shareholders voted overwhelmingly in favour of keeping Luke Innes and Colin Stirling on the Padbury board, backing the incumbents and rejecting the nominations of Sage, Mark Gwynne and Paul Kelly by a more than four to one margin.
Padbury is also the target of a takeover bid from Fe, which launched a $A13.6 million offer for Padbury in July.
While that offer was conditional on shareholders dumping the existing board at today?s meeting, the result is not the main reason Fe is considering pulling its bid, according to its chairman.
Sage told MiningNews.net today that, while the Fe board has not yet made a formal decision to abandon its takeover bid, the company will consider its options in light of the renewed likelihood of the introduction of the Minerals Resource Rent Tax after Prime Minister Julia Gillard was returned to power yesterday.
Sage rejected the suggestion that today?s decision of Padbury shareholders was an effective rejection of the Fe takeover bid, saying he and the other Fe directors had become involved in the spill attempt only at the invitation of Denis McInerney and had made no direct pitch to Padbury holders themselves.
He said the future viability of magnetite projects in Western Australia would weigh more heavily on the Fe board than other factors.
?The mining tax changes everything. Padbury is in the area that will be affected most by this tax if it comes in, because of the region it?s in. They?re all magnetite plays ? they need billions and billions of dollars of investment,? Sage said.
Sage said the uncertainty the new tax will throw over investment in new iron ore projects in Western Australia would be the major factor in any Fe decision to drop its play for Padbury.
?[The banks] won?t stump up for Andrew Forrest at the moment for his new expansion project because of the tax. So there?s no way, I don?t think, any of the projects in the Mid West with the big capexs can get going with the impost of this tax,? he said.
?So we?ll review the situation over the next week or so now this new tax may come in.?
New Padbury chairman Dr John Saunders told MNN after the meeting the endorsement of the company?s existing board sent a clear message to Fe that Padbury shareholders weren?t interested in the takeover bid, and wanted the company to get on with the job of developing its iron ore assets.
?I would take this vote as a proxy for the likely shareholder vote on the takeover offer that came from Tony Sage. I think shareholders are prepared to give this board time to execute the plan and strategy we have ? to get to a JORC resource of 500 million tonnes by the end of this year,? Saunders said.
?There?s a drilling campaign about to begin. It?s all planned, it?s all funded, and then we?ll press on from there.?
The company is still awaiting the formalisation of an agreement with an unnamed Chinese investor, first announced in May. This could result in the company receiving a $5 million capital investment at 3.5c, as well as signal future development and offtake agreements.
MNN understands that agreement is still in place, with the deadline for the formalisation for the memorandum of understanding having been extended to around the end of this month.
Padbury shares fell 0.1c to 1.3c by the close of trading today, with Fe unchanged at 12c. Click here to read the rest of today's news stories.
PDY Price at posting:
1.3¢ Sentiment: LT Buy Disclosure: Held
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