Deal paves way for Sundance bid
Sundance shares closed 15.6 per cent, or 5¢, higher at 37¢ on Monday after the company told the sharemarket the Ministerial Council for the Republic of Congo had approved its application to develop its Nabeba iron ore deposit. The approval was a key hurdle in Hanlong Group's $1.3 billion offer for Sundance.
Investors were also heartened by reports in Chinese media that Sundance's suitor, the privately held Hanlong, expects to complete the takeover by the start of March, after it lodges documents with Australian regulator Australian Securities and Investments Commission.
Hanlong owns about 17 per cent of Sundance and wants the iron ore explorer for its $4.7 billion Mbalam mine in western Africa that straddles the border between the republics of Congo and Cameroon.
The Mbalam project, which includes building a 510-kilometre rail line and deepwater port, is expected to produce 35 million tonnes a year of iron ore. Monday's share price rise trims Sundance's fall for the year to 6 per cent, but the stock continues to trade well south of Hanlong's 45¢-a-share offer.
Hanlong's offer was revised down last year from 57¢ a share, amid falling world iron ore prices.
It is believed the takeover move would give China a stronger role in setting global iron ore prices. Chinese news agency Xinhua has also reported Hanlong was "in talks with leading state firms to jointly develop" the project in Mbalam.
The Sundance managing director and chief executive, Giulio Casello, thanked the Congo for its support over the years. The approval helped pave the way for "work to start on what will be a world-class iron ore operation once financing is confirmed", the company said.
"It will bring with it significant economic, financial and social benefits for the people of the Republic of Congo."
The prospect of a takeover appeared remote last month following news Hanlong wanted to delay the bid because it could not secure funding by December 13. Hanlong pushed back the funding date to January 31.
In December, Sundance reported Hanlong had secured $US438 million from the China Development Bank to fund the acquisition of Sundance.
But the market has persistently priced the stock below its takeover price, so there were continuing doubts about the viability of the deal.
The deal has been approved by the Foreign Investment Review Board.
Frequently Asked Questions about this Article…
Sundance shares rose after the Ministerial Council for the Republic of Congo approved its application to develop the Nabeba iron ore deposit. The stock closed 15.6% higher (up 5¢) at 37¢ on the trading day described in the article, trimming the year's fall to about 6% but remaining below Hanlong's 45¢-a-share offer.
Hanlong Group is the major suitor for Sundance Resources and already owns about 17% of the company. It has made a roughly $1.3 billion takeover offer for Sundance, priced at 45¢ a share after a revision down from a previous 57¢-a-share offer.
According to the article, the Republic of Congo's Ministerial Council approved Sundance's application to develop the Nabeba deposit, the deal has been approved by the Foreign Investment Review Board (FIRB), and Hanlong is expected to lodge takeover documents with the Australian regulator ASIC as part of the process.
The Mbalam project is a $4.7 billion iron ore development in western Africa that straddles the border between the Republic of Congo and Cameroon. It includes plans for a 510-kilometre rail line and a deepwater port and is expected to produce about 35 million tonnes a year — a major reason Hanlong wants Sundance as a strategic asset.
The article reports that Hanlong secured US$438 million from the China Development Bank to help fund the acquisition, but there were earlier concerns about overall funding which led Hanlong to push back its funding deadline from December 13 to January 31.
Market skepticism persisted because the share price continued to trade below Hanlong's 45¢ offer, and there were doubts about the viability of the deal given earlier funding delays and the broader fall in world iron ore prices that prompted Hanlong's offer revision.
The article suggests the takeover could give China a stronger role in influencing global iron ore prices, and Sundance's managing director said the Nabeba approval would pave the way for a world-class iron ore operation that would bring significant economic, financial and social benefits to the people of the Republic of Congo.
Chinese media reports cited in the article indicated Hanlong expected to complete the takeover by the start of March, assuming it lodges the required documents with the Australian Securities and Investments Commission (ASIC) and secures the necessary funding and approvals.
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