Tuesday, August 9, 2022

Discovery Metals shares spike on Cathay Fortune takeover news

Shares of listed copper mining outfit, Discovery Metals, closed higher on Friday following news that a Chinese firm had tabled a non binding offer to acquire the Australian company with high grade copper assets in Botswana.

The Board of the BSE-quoted company earlier in the week said it was studying a P6.6 billion proposal from Cathay Fortune Corporation (CFC) owned by Chinese billionaire Yu Yong and China-Africa Development Fund (CAD Fund) to acquire all the shares (not currently held by the bidder) in Discovery for A$1.70 per share.

CFC owns 13.7 percent of Discovery’s ordinary shares.

“The Board is currently evaluating the Indicative Proposal and will respond to the
Bidder as soon as that evaluation is further progressed,” Discovery Metals said in a note to shareholders.

“There is no certainty that the Board will agree to enter into an agreement with the Bidder regarding the Indicative Proposal on the terms proposed, or at all, or that a transaction will result from the Indicative Proposal.”

The proposal valued at US$ 850 million (about P6.69 billion), will see the Chinese private equity firm having access to the Kalahari Copperbelt in Botswana to secure China’s rising appetite and bolster acquisitions in Africa.

Discovery Metals was the major market mover, up 160 thebe to 1160 thebe making a turnaround from being in the red in last week’s session.

The Australian company is focused on the emerging Kalahari Copperbelt in north-west Botswana.

It is currently producing copper the Boseto Copper Project, which it owns 100 percent. Company is a copper producer at its 100 percent owned Boseto Copper Project.

The Kalahari Copperbelt sediment-hosted mineralisation of the Boseto Copper Project is similar in style to the well-known and large deposits of the Central African Copperbelt of Zambia and the Democratic Republic of the Congo.

Discovery Metals has prospecting licences covering 11,872 km2 along the Kalahari Copperbelt.

“The Discovery Metals Board will update the market following consideration of the Indicative Proposal and its terms. In the meantime, shareholders do not need to take any action in response to the Indicative Proposal,” the company added.

CFC has received approval from both China’s National Development and Reform Commission, or NDRC and Australia’s Foreign Investment Review Board, or FIRB.

Motswedi Securities said in its weekly note that CFC expects to receive approvals from the Chinese Ministry of Commerce and State Administration of Foreign Exchange “in the near term”, and will fund the deal with a US$600 term loan facility from China Development Bank.

UBS is acting as financial advisor and GRT Lawyers is acting as legal advisor to Discovery Metals.

RELATED STORIES

Read this week's paper