Xanadu Mines’ share price soared more than 50 per cent today after the company received an 8 cents per share takeover offer from unlisted Bastion Mining, valuing the Mongolian-focused copper-gold developer at $160 million.
The proposed takeover offer follows hot on the heels of an expired exclusivity period earlier this month over a control transaction the company was negotiating with joint venture partner and major shareholder Zijin Mining.
The two parties were unable to come to terms by the expiry date, at which point Bastion, a consortium made up of Singapore-based private investment firm Boroo Pte Ltd and existing Xanadu director Ganbayar Lkhagvasuren, swooped in to table an off-market takeover offer for all Xanadu’s outstanding shares. In the absence of a superior offer, the Xanadu board unanimously recommended shareholders accept the deal.
Xanadu’s flagship Kharmagtai project, held in a 50:50 partnership with Zijin, is a significant copper-gold resource hosting a massive 730-million-tonne ore reserve, which included 1.6Mt of copper and 4M ounces of gold.
A recent feasibility study for Kharmagtai pegged the project’s net present value at a weighty US$930M (A$1.44 billion) on a US$890M (A$1.3B) capex, generating a US$293M (A$455M) annual EBITDA. Based on an output tipped at 80,000t copper and 170,000 ounces of gold a year – and assuming a 70 cents per pound copper cost – the mine is set to pay off in four years and deliver cash dividends for almost another 30 years.
Xanadu executive chairman and managing director Colin Moorhead said: "The proposed acquisition of Xanadu by Bastion is aligned with the company's strategy of generating returns for shareholders and also providing a liquidity event. Bastion's offer provides Xanadu shareholders with an attractive premium, which recognises the company's inherent value and considerable achievements in progressing the Kharmagtai copper-gold project. “
Moorhead said the company’s takeover board committee directors considered the offer to be in the best interest of shareholders and unanimously recommended shareholders’ acceptance, in the absence of a superior proposal and subject to an independent expert concluding it was fair and reasonable.
The offer represents a 57 per cent premium to Xanadu’s last closing price on Friday, May16.
Xanadu says previous attempts to lock down a deal with Zijin collapsed due to insufficient certainty around Zijin’s commitment to a control transaction. On behalf of Bastion, Lkhagvasuren tellingly said the offer announced today provides Xanadu’s shareholders with the certainty of cash at a significant premium to the company’s share price, against a market backdrop of considerable uncertainty.
“Bastion is ideally positioned to advance Kharmagtai to the next stage of development with the benefit of Boroo's experience in acquiring, financing and developing mining operations in Mongolia," Lkhagvasuren said.
Bastion’s offer remains subject to the company acquiring at least a 50.1 per cent interest in Xanadu, at which point Bastion will declare the offer unconditional.
In addition to the 8c per share takeover offer, Bastion will subscribe for almost 287M shares at 6c per share to help Xanadu meet its joint venture and corporate funding obligations during the offer period. That subscription will inject a further $17.2M into Xanadu’s coffers.
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