PANAUST’S long-term supportive shareholder has turned hostile, proposing a $1.4 billion takeover bid which the target has immediately said materially undervalues its copper and gold assets.
Guangdong Rising Assets Management Co., a state-owned Chinese investment group, offered to take control of PanAust Ltd. (PNA) in a cash bid that values the Laos-focused copper producer at A$1.5 billion ($1.4 billion).
Guangdong Rising offered A$2.30 a share in a conditional proposal, PanAust said today in a statement. That’s 46 percent more than Brisbane, Australia-based PanAust’s last close. PanAust rejected the offer as being too low and agreed to give Guangdong Rising, its largest shareholder with a 23 percent stake, access to its financial information. It rose as much as 35 percent today in Sydney trading.
Buying PanAust would give Guangdong Rising control of mines in Laos as well as the Frieda River project in Papua New Guinea, described by the target as one of the world’s largest undeveloped copper and gold deposits. PanAust agreed last year to buy Glencore Xstrata Plc (GLEN)’s stake in Frieda River, estimating the development costs at as much as $1.8 billion.
“It’s probably more likely those projects will go ahead under a new ownership,” Gareth James, a Sydney-based analyst with Morningstar Inc. said today by phone. PanAust could face difficulty in seeking funding, while Guangdong Rising “can just go ahead with those projects as they have access to capital, and that removes the uncertainty,” he said.
PanAust surged 33 percent to A$2.10 at 10:43 a.m. in Sydney, the most in more than five years. PanAust, whose shares traded as high as A$4.475 in 2010, had lost about 64 percent of its value to yesterday since that peak.
China’s demand for assets may help fuel a doubling in the number of mining deals worldwide this year, according to Jay Leary, law firm Herbert Smith Freehills’s joint global relationship partner for BHP Billiton Ltd., the world’s biggest miner. Copper, iron ore and coal are the top targets, he said.
China Minmetals Corp., the state-owned metals trader, led a group that agreed last month to pay $5.85 billion for Glencore’s Las Bambas copper project in Peru as China seeks greater control over material supplies.
PanAust plans to decide next year whether to focus on the development of Frieda River or the Inca de Oro project in Chile, a joint venture with Codelco, the world’s biggest copper producer, Managing Director Gary Stafford said in March. That was the same month that Stafford said he plans to step down within 18 months.
Mining acquisitions by Chinese companies surged 63 percent in the first four months of this year and are forecast to accelerate as new rules in China from last week mean most overseas deals under $1 billion don’t need government approval. The decline in prices, with metals from copper to iron ore dipping into bear markets since April last year, has heightened appetites.
China’s inbound shipments of copper surged 52 percent in April from a year earlier. Stockpiles monitored by exchanges in the U.K., U.S. and China have dropped 31 percent this year to the lowest since December 2008, according to data compiled by Bloomberg.
China imported 3.2 million tons of copper metal and 10.1 million tons of copper ore and concentrate last year, data from the country’s customs authority shows. Its consumption totaled 9.83 million tons in 2013, or 47 percent of global demand, according to the World Bureau of Metal Statistics.
Guangdong Rising bought a 19.9 percent stake in PanAust for A$2.02 per share in 2009, data compiled by Bloomberg show.
Frieda River could produce 100,000 metric tons of copper and 160,000 ounces of gold annually and have a mine life of 18 years, according to PanAust, which is being advised by Rothschild.