Asset Backed bids $6m for miner

Asset Backed Holdings has launched an off-market $6.3 million cash bid for unlisted Christmas Island phosphate miner Phosphate Resources Limited, in which it already holds one third of the stock.

The bid came on the day before the Federal Government granted PRL an undisclosed compensation payment, believed to be a seven figure sum.

The compensation is for phosphate-rich lands the Commonwealth excised from PRL’s lease for the creation of the Christmas Island detention centre and for parts of a proposed space port.

PRL had been seeking $20 million compensation, however it is understood the payout is less than $5 million.

This is the second time Asset Backed has made a bid for PRL in the past two years. Director Susmit Shah said the latest bid was unrelated to the compensation payment.

Its latest bid offers $3 for every PRL share and is $1 less than its previous offer.

The latest assault is conditional on Asset Backed gaining 90 per cent of the issued shares in PRL. It currently has a 34.3 per cent stake in PRL.

However, Asset Backed could face a major hurdle if a Union of Christmas Island Workers plan succeeds.

As part of its enterprise bargaining agreement negotiations, the union has asked for 19.9 per cent of the shares in PRL to be placed in a trust controlled by the union, the Christmas Island Shire and two independent professionals – an accountant and a lawyer to be sourced from Australia.

In return, workers will agree to a two-year wages freeze, job cuts and a reduction in conditions.

It is understood the PRL board is split over whether to agree to the union’s terms.

UCIW secretary and Christmas Island shire president Gordon Thompson said the workers had realised that they would have to make sacrifices if the company was to survive.

He said the previous Asset Backed bid, which took the shape of a $4.2 million share buyback followed by a $4.2 million rights issue, had drained the miner of cash.

PRL was created in the early 1990s to reopen the Christmas Island phosphate mine, which had been closed by the Federal Government, and to bring jobs back to the island workers.

Most Christmas Islanders are shareholders in the company.

Mr Shah declined to comment on the union’s share bid.

When the first bid took place in 2002, former Asset Backed chairman Michael Perrott and former director Anthony Rigoll were on the PRL board until early 2003.

David Argyle, who remains a director of Asset Backed, also quit the PRL board soon after Mr Perrott and Mr Rigoll.

In 2002, PRL’s board agreed to conduct the $4.2 million buyback and then, six months later, announced the $4.2 million rights issue.

Asset Backed was to underwrite $2.7 million of the rights issue.

Because it hadn’t taken part in the share buyback its stake in PRL rose to 26.7 per cent. Had the rights issue gone ahead and been undersubscribed, Asset Backed could have held up to 39.6 per cent of PRL.

In February last year the Takeovers Panel ordered Asset Backed to cease any further takeover activities for one year.

It emerged, at Asset Backed’s annual general meeting in 2003, that the takeover bid had been aimed at creating a regional phosphate player linking PRL with Mr Argyle’s China-based phosphate company, Norwest Chemicals.

Later that year Mr Perrott, Peter Huston and Ludger Komäscher, a replacement director for Mr Rigoll, quit Asset Backed and were replaced by mining entrepreneur Mark Caruso and Mr Shah.

In April, Asset Backed bought Norwest Chemicals from Mr Argyle for $6.4 million, split $2.12 million in cash and the rest in Asset Backed shares.

At the time Mr Caruso said Asset Backed planned to create a China-focused phosphate-based regional mining and resource group.

To fund the current bid, Mr Shah said the company had about $4 million in cash and would raise the remainder through a mix of debt and equity raisings.

“We have a 90 per cent minimum acceptance condition but that’s something we’ll see how we go with, so we may not need the full $6.3 million,” he said.

“We’re not going to raise any more equity than we have to.”