Lynas Corporation Ltd (ASX:LYC) has terminated its proposed transaction with Forge Resources Ltd (ASX:FRG) after weeks of mounting controversy stemming from conflict of interest concerns.
In March Lynas inked a deal to sell Forge the Crown and Swan rare earths and metals deposits at Mt Weld in Western Australia, for $20.7 million cash plus 7 million options to acquire Forge shares.
However, the deal quickly came under scrutiny as Lynas’ executive chairman Nicholas Curtis is also a non executive chairman of Forge Resources and stood to benefit if the deal went through.
After shareholders threatened legal action against Lynas Australia’s corporate regulator, the Australian Securities and Investments Commission, reportedly stepped in to investigate.
Given the uncertainty of Lynas shareholder support, Forge now says it has agreed to Lynas’ request to abandon the deal as it says the development of the deposits would not have been possible without a co-operative relationship.
Lynas will compensate Forge $600,000 for costs incurred relating to the transaction, and advises that it will now focus on delivering its Rare Earth project in Western Australia and Malaysia.
In the first half of the 2011 financial year Lynas Corporation recorded a net loss of $20.5 million.
LYC Price at posting:
$2.22 Sentiment: None Disclosure: Held
