re: Ann: Elemental Provides Update on Dingyi ... Elemental's potash play in doubt
PAUL GARVEY | The Australian | December 26, 2013 12:00AM
A $264 million takeover bid for potash play Elemental Minerals looks to be on the brink of collapse after complications with its Chinese-backed bidder.
West Perth-headquartered Elemental and Hong Kong-listed Dingyi Group Investment agreed on July 1 to a takeover deal that would see Dingyi pay 66c a share for Elemental.
The deal now looks to be in jeopardy, however, following a ruling from Hong Kong Stock Exchange authorities announced by Elemental on Christmas Eve.
The Hong Kong exchange has classed the Dingyi offer as a reverse takeover. The decision, Elemental said, meant Dingyi would not be able to obtain the clearance needed from the exchange to get approval for the bid from Dingyi shareholders.
Shares in Elemental fell heavily on Christmas Eve in response to the news, closing down 10.5c or 24.4 per cent to 32.5c, less than half the proposed Dingyi price.
The only hope of the offer going ahead in its current form would appear to be an appeal to the Hong Kong exchange's listing committee.
"Dingyi has informed Elemental that it has requested a review of this decision by the SEHK Listing Committee and thus Elemental intends to do all it can to support Dingyi in this appeal process and will continually assess it progress," Elemental said in a statement. "However, there can be no guarantee of success or that a decision will be made in a timely fashion."
Elemental's key asset is the Sintoukola potash project in the Republic of Congo. While the project is expected to support a long-life, low-cost potash operation, extensive infrastructure needs to be developed to support any eventual mine.
Studies have suggested the mine and infrastructure development could cost $US1.98 billion, or several times Elemental's current market capitalisation.
On Tuesday, Elemental indicated Dingyi had made good progress in lining up the finance needed to progress Sintoukola.
"Elemental does not doubt Dingyi and its major shareholder Mr Li's commitment to the Sintoukola project," the company said. "Since the Dingyi offer has been made, Dingyi has informed Elemental and the SEHK it has managed to secure non-binding letters of intent by Chinese and Hong Kong-based banks to provide up to $US1.8bn ($2.01bn) in project financing."
Dingyi's offer appeared to be a big win for Elemental shareholders when it was announced, representing a 126 per cent premium to its share price at the time, but the offer has dragged on much longer than expected.
Sundance Resources, another junior Australian company with an African resources project and significant capital expenditure requirements, experienced similar delays
K2P Price at posting:
35.0¢ Sentiment: None Disclosure: Not Held
