Junior coal miner MC Mining, which holds coal mining assets in SA, has doubled down on its call to shareholders to reject a proposed buyout offer by a consortium of investors, saying it was “opportunistically timed to deprive [shareholders] of future potential value” of the group’s assets.
In a target’s statement published by MC Mining on Monday, which followed a preliminary view published in mid-February advising shareholders to not accept the offer, the independent board committee provided further arguments outlining why they believed the offer undervalued the potential of the group’s assets.
On February 2, a consortium of investors represented by Goldway Capital Investment made an all-cash off-market takeover offer for all the remaining shares in MC Mining, of A$0.16 cash for each share.
The shareholders presented by the consortium, including privately owned investment group Senosi, venture capital firm Shine Capital, and private company Dendocept, already hold a collective 64% of the shares in the company.
If the deal is passed, it could see MC Mining, which has a primary listing in Australia as well as secondary listings on the JSE and the UK’s Alternative Investment Market (AIM), being delisted from all the stock exchanges subject to regulatory approvals in all three countries.
The deal, however, requires at least 82.2% of the shares in issue to go through.
According to the independent board committee, the offer price of A$0.16 represented a 20%-30% discount compared to a non-binding offer of between A$0.20 and A$0.23 per share made by Dendocept and Senosi in September.
“The offer price does not provide an attractive premium for control based on [MC Mining’s] historical trading prices prior to the date of the announcement of the offer and falls below the typical premium for an Australian change of control transaction”, the committee said.
The offer price represented a premium of only 1.4% compared with the company’s six-month volume-weighted average price of shares to November 3 when the consortium announced its intention to make a takeover bid.
In addition, said the committee, the offer price represented a discount of 27.4% to the 12-month volume-weighted average price per share to November 3.
MC Mining relies on the Uitkomst colliery in KwaZulu-Natal for cash generation, but its flagship project is the development of the capital-intensive Makhado project, which would be SA’s only producer of hard-coking coal.
Distinct from thermal coal used in power stations, coking coal — and hard-coking coal, in particular — is a premium product used in steelmaking.
The Makhado project has been in the making for the past decade, but MC Mining has been battling to secure funding for project.
However, according to the independent board committee the company was “at an advanced stage of securing the cornerstone funding for the development of the Makhado, which, if approved by the [directors], would have been the catalyst for composite equity and debt funding required for the construction of Makhado”.
This funding was unable to be concluded due to the verbal statement of intent made by certain members of the consortium of a planned takeover offer, the committee said.
In light of this, according to the committee, the offer price failed to recognise the value attributable to the “shovel ready” Makhado project which has a 28-year life of mine and a net present value of R6.8bn (A$544m).
Accounting firm BDO has been appointed as an independent expert to assess the merits of the offer and mining consultants SRK has been appointed as the technical mining expert for the independent expert, BDO.
SRK was not able to complete the required work for the expert’s report before the March 4 deadline, but MC Mining said on Monday the report and opinion by BDO would be included in a supplementary target’s statement to be lodged “on or around” March 18.
The committee said it would either confirm its recommendation to reject the offer, or change its recommendation, depending on the opinion of the independent expert. That would be communicated in the supplementary statement.
The offer is scheduled to close on April 5, unless extended or withdrawn.
With Andries Mahlangu
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