The tussle for control of Phoenix Gold intensified today after Zijin Mining Group struck a pre-sales agreement with one of the miner's largest shareholders, boosting its interest to 17.9 per cent ahead of announcing a cash takeover bid that values the business at $47 million.
The tussle for control of Phoenix Gold intensified today after Zijin Mining Group struck a pre-sales agreement with one of the miner's largest shareholders, boosting its interest to 17.9 per cent ahead of announcing a cash takeover bid that values the business at $47 million.
Zijin, the Chinese gold company behind the recent takeover of Norton Gold Fields, has announced its intention to make an off-market takeover offer for all of the shares it doesn’t already own in Phoenix at a cash price of 10 cents per share, in an attempt to counter Evolution Mining's plan to increase its shareholding to 19.9 per cent.
The Chinese firm increased its interest in Phoenix from 8.9 per cent to 17.9 per cent by executing a pre-bid agreement with one of Phoenix’s largest non-interested shareholders, Geologic Resources Partners, while four of Phoenix's largest shareholders have declared their support for Zijin above Evolution’s tranche two placement offer.
Zijin’s offer is a 21.9 per cent premium to Phoenix’s 30-day volume weighted average price from June 17 - before Phoenix's share price had surged on the 18th and 19th.
Evolution bought a large stake in the gold mining company in May, by way of a two-tranche placement at an average price of 8.5 cents each for $9 million.
The first tranche of the placement has already been completed and has given Evolution a 9.3 per cent stake in Phoenix, however the second tranche, which if successful would give Evolution a 19.9 per cent holding, is subject to a general meeting scheduled for tomorrow.
In a statement, Phoenix said it had engaged in discussions with Zijin about the proposal, which was sent after the close of trade on Friday, but was unable to barter for an improved offer price.
“As a result, the Phoenix board formed the considered view that it could not recommend the proposed offer in its current form,” the company said.
“In particular, the Phoenix board determined that it was inappropriate, on the basis of Zijin’s current proposed offer, to limit its ability to solicit and facilitate a superior proposal that could deliver greater value to Phoenix shareholders.”
The company has advised its shareholders take no action towards the proposed offer.
Zijin said it intends to undertake an immediate operational review of Phoenix, if the deal is successful.
“In particular, Zijin wishes to assess possible synergies it may be able to unlock from the Castle Hill projects,” the company said.
“Zijin also notes that other parties may attribute more value to exploration tenements on trend with the Zuleika shear than Zijin. We ascribe little or no value for the heap leach assets and intend to suspend these activities while the review is completed.”
Zijin also said it was of the view that Evolution’s offer delivered value to that company at the expense of Phoenix’s remaining shareholders.
Executive director George Fang said the proposed offer was clearly superior to the proposed Evolution tranche two placement, as demonstrated by the support of key shareholders.
“We encourage all remaining shareholders of Phoenix to also vote against the passing of resolution two at the Phoenix general meeting so that we are able to make our all cash offer, which will enable shareholders to realise immediate and certain cash value on successful completion of the offer,” he said.
A spokesperson for Zijin said if Evolution’s offer were approved by shareholders tomorrow, Zijin will withdraw its proposal and will consider its options as to whether it will retain its shareholding in Phoenix or sell down its stake.
Zijin will require a minimum 50.1 per cent acceptance vote and FIRB approval for its bid to be accepted.
Phoenix has appointed RBC Capital Markets as financial advisor and Allion Legal as legal adviser.
Zijin is advised by Argonaut in respect of the offer and HopgoodGanim have been appointed as legal adviser.
Zijin recently finalised its acquisition of Norton, in a deal worth $41 million.
Phoenix shares were 12.2 per cent higher to 11 cents at the close of trade.
Evolution shares dropped 0.4 per cent to $1.24.
