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Ruby miner Mustang in spotlight as global bidding war for neighbour hots up

15th June 2017

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It didn’t rate a mention in the Australian media, but there was a takeover bid launched in London this week which could have big ramifications for ASX-listed ruby miner Mustang Resources (ASX: MUS).

Chinese investment giant Fosun launched a bidding war for Gemfields, the Aim-listed producer of rubies and emeralds.

Gemfields is Mustang’s bigger, more advanced neighbour at its Montepuez ruby project in Mozambique. Mustang is fast building an extensive ruby inventory ahead of its first auction in October.

With Gemfields and Mustang the only two listed ruby miners in the world, Fosun’s takeover offer is highly significant for Mustang shareholders.

Fosun has offered to pay 40.85p a share for Gemfields, a 15 per cent premium to the miner’s previous closing price and a 10 per cent premium to an earlier offer from South African group Pallinghurst.

The Chinese company said its offer, which values Gemfields at around £224m, was a “compelling cash alternative at a significant premium to the Pallinghurst offer”.

Pallinghurst, an investment fund set up by former BHP Billiton boss Brian Gilbertson, already owns 47 per cent of Gemfields.

Pallinghurst outraged minority shareholders last month with a nil-premium bid for the rest of the company, blaming Gemfields' poor returns for wanting to take it private. Pallinghurst claimed to have support from holders of 75 per cent of the shares to take it private.

Gemfields’ board - minus Sean Gilbertson, the son of Brian - rejected Pallinghurst’s offer as “derisory”.

In what will be considered a key piece of commentary for Mustang shareholders, Fosun said it saw “huge potential” in the Chinese market for gemstones as consumers there “increasingly demonstrate their wealth”.