WARY of the holiday season and investor forgetfulness, Tasmanian nickel miner Allegiance Mining has reminded holders that it is still considering Zinifex's $775 million takeover bid, recommending they take no action for now.
In a postcard sent out to shareholders yesterday, chairman Tony Howland-Rose maintained his tough stance, labelling the bid "unsolicited and opportunistic".
But it might be a week or two yet before Mr Howland-Rose and his board decide on whether to reject or recommend the offer. The key will most probably be whether his advisers Merrill Lynch can attract a counter bidder prepared to pay up on the back of a bullish stance on nickel prices, as well as optimism over additional discoveries around Allegiance's Avebury mine.
Allegiance plans to start production at Avebury on Tasmania's west coast early this year, with a targeted output of 8500 tonnes a year. The board will be encouraged by Thursday's 5 per cent rise in the nickel price on the London Metal Exchange.
But while there is speculation that Zinifex could face competition, Allegiance shares are holding only a narrow premium to the offer. Zinifex has offered 90c a share, rising to $1.00 a share if the Allegiance board recommends its offer or it secures more than 30 per cent of the target. Allegiance shares were trading at 71c ahead of the offer, and have subsequently risen as high as $1.095. They ended yesterday at $1.04.
Goldmans Sach JB Were's resources analysts have speculated that Zinifex's decision to launch a bid without first trying to make a friendly deal was a sign that it is anticipating Allegiance to reject the offer.
The Allegiance board and management have about a 6.2 per cent stake so are in a position to exercise some leverage by trying to stop Zinifex getting past 90 per cent control, and moving to compulsory acquisition.
But Zinifex has made its bid unconditional on any minimal acceptance level, and might have no expectation of getting over 90 per cent, given Chinese nickel giant Jinchuan has a 10.4 per cent stake.
As GSJBW has pointed out, Jinchuan's primary interest is likely its contract to buy all the production from Avebury and it could be expected to work with whoever owns the mine.
AGM Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
