discovery metals rebuffs chinese bid

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Discovery Metals rebuffs Chinese bid
By Leslie Hook in Beijing


African copper miner Discovery Metals has rebuffed an initial takeover offer from Chinese private equity group Cathay Fortune, raising the stakes in the battle for control of the Australian-listed mining company.
Discovery Metals said on Thursday that Cathay’s offer price of A$1.70 per share was “inadequate” but that the board would be willing to consider a new proposal from the Chinese group.
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Cathay Fortune, a Shanghai-based private equity group controlled by billionaire Yu Yong, did not have any immediate response. A clerk in Cathay’s Shanghai office said that a team was still working on the deal, while a spokesperson in Australia said it was too soon to say what the company’s next step would be.
In a statement, the directors of Discovery Metals said that the offer price “does not reflect, in the context of a change of control, the value of the company’s operations and expansion plans, the potential to increase the resources on the company’s tenements through further exploration, the strategic value of the company with an operating project and management team in Botswana, and the scarcity value of the company”.
Discovery’s main asset is a copper mine in Botswana that is on the cusp of starting commercial production, and the company also has more than 11,000 sq km of exploration acreage across the Kalahari copper belt in Northern Botswana. Shares in Discovery closed at A$1.64 on Thursday afternoon, before the announcement was made, reflecting investor scepticism about whether a deal would go through.
China is the world’s biggest consumer of copper, used in items such as household appliances and air conditioners, and Beijing has encouraged Chinese resources companies to expand their presence overseas to gain access to resources. Copper has been a particularly favoured target of Chinese companies, with recent copper deals including Minmetals’ C$1.3bn acquisition of Anvil Mining earlier this year.
However, should Cathay’s bid for Discovery now turn hostile, it would be unusual in several respects. Most Chinese acquirers are state-owned mining groups, whereas Cathay is a privately-owned private equity firm controlled by a single major shareholder, Mr Yu.
Cathay also has relatively little experience in mining and has never operated a mine. However it has been exposed to the mining sector through its 34 per cent stake in China Molybdenum, which is listed in Hong Kong and did a secondary listing in Shanghai earlier this week.