Padbury Mining receives offer from China's Sichuan Taifeng...

Padbury Mining receives offer from China's Sichuan Taifeng Group

Thursday, April 28, 2011 by Proactive Investors

Padbury Mining (ASX: PDY) has received a non-binding offer from China's Taifeng Group Co Ltd (Taifeng) to buy a 30% stake in the company as well as to acquire 50-60% of Peak Hill Iron Ore project.

The deal is subject to the agreement of Padbury shareholders and approval from the Foreign Investment Review Board.

Sichuan Taifeng was established in 1997 is a privately owned diversified company based in Zigong in Sichuan Province, China.

The offer follows Padbury's exploration success last month when it achieved a maiden JORC Inferred Resource of 850 million tonnes at 27.3% iron for the Telecom Hill Deposit, located at the company's Peak Hill Iron Project Joint Venture.

Taifeng has offered to take a 19.9% placement in Padbury at $0.033 per share, to be maintained at a fully diluted level. Current share price is $0.023.

Taifeng is seeking a one-year option to increase its shareholding to 30% of the fully diluted share capital, with options exercisable at 5 cents per share, subject to the agreement of Padbury's shareholders.

The offer includes the acquisition of 50-60% of the Peak Hill Iron Ore project at an agreed price on completion of a Bankable Feasibility Study of the project.

Dr John Saunders, Padbury chairman, said "I am pleased to see interest in Padbury growing following the release of our maiden JORC magnetite resource and our haematite exploration target. I expect this to be one of several expressions of interest to come from Asia."

The defined JORC resource announced by Padbury beat market expectations, easily surpassing the 500 million tonne short term target. A hematite exploration target of up to 28 million tonnes at 55-60% iron has been set.

Adding to the potential for an increase in resource, the current resource was defined from just 4 kilometres of a 10 kilometre strike length, and is likely to see a significant boost to the resource base from further drilling.

In May, a six-member delegation visit by Taifeng led by Chairman Song Yuangang to the company's tenements will be be part of the due diligence process and a binding offer will be submitted within 10 days of the successful completion of these investigations.

If approved by Padbury shareholders, the deal will then require the consent of the Foreign Investment Review Board.

Taifeng's complete offer also includes a pre-emptive right to subscribe to Padbury shares from any future equity placements in order to maintain its equity undiluted and a seat on Padbury's Board following the acquisition of the initial 19.9% stake being sought.

Telecom Hill is located in the Mid-West region of Western Australia which has grown in stature as a significant iron ore province.

Padbury (70%) and joint venture partner Aurium Resources (30%) (ASX: AGU) have been undergoing a drilling program designed to assess the potential of one third of the 1.5 to 2.0 billion tonne (Bt) exploration target, grading 25% to 35% iron.

The drill results from the prospect have demonstrated magnetite mineralisation is continuous over the entire tested length of 4 kilometres of the total 10 kilometre strike length. The best intersection was 198 metres at 34.2% iron (FE).

Initial Davis Tube Recovery (DTR) test work shows the magnetite bearing BIFs can produce high-grade concentrates.

Padbury has a comprehensive program of work planned for the Peak Hill project during 2011, including a drilling program and environmental and heritage studies.

On March 29, Proactive Investors said: "With a market capitalisation of $40 million, Padbury appears to have a miserly valuation based on the potential Resource and exploration target of 3.5-5Bt at Telecom Hill."

"When compared with peer Gindalbie Metals (ASX: GBG), whose market cap currently stands at $991.33 million and has a Resource of 2.5Bt at 35.9%, there is significant room for valuation increase for Padbury."