Hunnu board gives blessing to $400m bid

Thai coalminer Banpu plans to spend $400 million on Hunnu in a recommended takeover pitched at $1.80 a share.

The company went public with its shares being offered at just 20? in February last year.

Along with holding $36 million in cash to finance its growth plans, Hunnu has interests in several prospects in the south and middle Gobi areas, claiming total reserves of 843 million tonnes.

The company's shares were added only last week to the ASX 300 index.

Hunnu, which is run by Mongolian national George Tumur, says it has interests in as many as 15 potential deposits in the country, the largest being the Unst Khudag prospect, which is believed to have 676 million tonnes of coal. It also has an 85 per cent interest in the Tsant Uul project, which is due to start production by the end of the year, with output projected to reach 1.5 million tonnes next year and doubling to 3 million tonnes annually by 2013.

Hunnu bought a 70 per cent stake recently from Rio Tinto in the Altai Nuurs coking coal project, which it says has an "exploration target of 250 million tonnes to 500 million tonnes". This was disclosed during a recent investor presentation by the company.

The main constraints to Hunnu's ambitions are Mongolia's hostile climate and limited infrastructure. However, it does have the advantage of being close to large demand centres in China, such as Hebei province, a large steel production centre north of Beijing.

Banpu's bid for Hunnu is conditional on the target obtaining regulatory approval for its proposed projects in Mongolia, along with 90 per cent acceptance.

For Banpu, the bid marks a continued upswing in its growth plans, coming a year after it paid $2.4 billion for local coal producer Centennial Coal.

Hunnu's shares closed 34? higher at $1.725 - a slight discount to the indicated offer price.