news on 45c deal emerging

Sundance will accept bid at 45c a share: analyst
Date
August 14, 2012 - 3:43PM

Rania Spooner
Business reporter
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Negotiating power in the takeover-price battle between Perth-based Sundance Resources and Hanlong Mining rests with the Chinese investor, according to one resource analyst who remains bearish on the steel-making commodity.

The two companies have been tied in negotiations over price after Hanlong last week moved to renegotiate its June bid of 57 cents per Sundance share or about $1.7 billion.

BusinessDay understands Hanlong's reviewed per share bid has fluctuated between 40 cents and 45 cents in recent days, meanwhile other media have reported Sundance doesn't want anything below 50 cents.

Sundance, the owner of the Mbalam high-grade hematite iron ore project in Central West Africa, was due to come out of a trade halt on Thursday, but this was extended after negotiations stalled.

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As shareholders await an announcement, speculation has mounted over whether Sundance has the capacity to walk away from the deal with Mbalam requiring an estimated $4.7 billion for the first stage development, at a time when iron ore prices have continued to slide under $120 per tonne.

China's National Development and Reform Commission, which makes the final call on large corporate investments for Chinese companies, granted provisional approval for the transaction earlier this month, subject to a ''reasonable acquisition price''.

Sundance last traded on the ASX at 33.5 cents.

CLSA analyst Hayden Bairstow said based on the fall in iron ore prices and in Sundance's own price he believed Sundance would have to consider any offer near 45 cents.

"After the way the shares have traded in the last 12 months, anything in the mid-40s would be a price that would be pretty accurate," he said.

"Given where their price is and given where the market is they will accept it - it's an unfunded development play."

A Sundance spokesperson would only say the talks were ongoing.

Mr Bairstow said it was unusual to see a company attempt to renegotiate price at such a late stage in a transaction, but following the significant fall in iron ore prices and the amount of equity required to complete the Mbalam project, Hanlong's move was understandable.

"Given the change in the outlook since the initial bid was put in place they're just never going to get approval to pay for what they're offered," he said.

"The reverse could have happened, they could have agreed to this deal and the iron ore price is $200."

Mr Bairstow said he expected the iron ore price to make a slight recovering in the next two months, but remained dark on the long-term price. "Long term we're still at $70," he said.

Independent resources analyst Peter Strachan was far more optimistic on Sundance's value based on the mineral base of Mbalam, which includes 770 million tonnes of high-grade hematite resources.

"It's a difficult position for them to be in now, they can effectively just throw their hands up in the air and walk away from it, 40 cents is hardly going to represent a very good return for shareholders," he said.

This afternoon Sundance was unable to provide any guidance on when negotiations may be resolved.



Read more: http://www.watoday.com.au/business/sundance-will-accept-bid-at-45c-a-share-analyst-20120814-2462c.html#ixzz23Uvb9T3d