Case Study

There is plenty of speculation with regards to a possible takeover of NKP by Zijin. Now not all case studies demonstrate what the future may hold but it does provide some insight on corporate behaviour.

Take a look at Norton Gold ( NGF) and Zijin's takeover aspects since 2011.

Zijin commenced purchasing NGF back in 2011 and built a holding of 17%. In August 2012 it made an unconditional takeover offer at 25c plus a 2c div. A few months earlier the sp was around 17c. A number of shareholders exited. By April 2014 Zijin had 83% of NGF but not the 90% it was seeking for compulsory acquisition.

From the time the initial offer was made until mid 2014 we saw the sp drop dramatically to 10c.

Fast forward to April 2015 and we now have Zijin desperately wanting the balance of shares. Another offer of 20c was soon increased to 23cents. Surely this time the takeover will be completed?

Check out the charts and announcements since 2011 to follow the pattern of NGF.

Now lets anticipate where NKP will end up assuming Zijin makes a spirited takeover offer. Firstly we know that Genorah will sell close to its entire holding in NKP to Zijin. The sp struck will be anywhere from 10c to 15c. A premium on the current sp.

Zijin is aware that minorities have a large blocking stake and will not go under like debt ridden Genorah. So what tactic will be adopted? I can only speculate that they will follow a similar path to NGF with an initial offer. Lets say a premium on todays price of 7c. Again most likely just above Genorah's exit price.

Will they be able to dislodge minorities? Most likely a small number of holders will exit and enjoy a profit or loss rather than risk a fall similar that took place at NGF post the 25c offer. What about the rest of minorities? Indication from the rumour mill is that they will demand to see an independent valuation. They know that the value of NKP's platinum assets is many times more than any low ball offer. Platinum market projections also indicate a large increase in price as industry demand increases.

It will be interesting to see if Zijin follows the same tactics as it did with NGF or is astute enough to know that NKP is a different ball game. In my opinion only an offer many more times the current 7c will deliver the bounty. That is why expectations are muted in the range 25-35cents.

The day is fast approaching when Zijin's intentions will become clearer. Because NKP is not a producer Zijin will not wait 4 years ( like NGF) to finally take over NKP.