Sichuan Hanlong Group agreed to sweeten its offer for the rest of Sundance Resources Ltd. to A$1.36 billion ($1.3 billion) to gain control of the Australian company’s iron ore project in West Africa.
Hanlong, based in Chengdu, China, won acceptance after raising its July 18 offer by 14 percent to 57 Australian cents a share, valuing the Perth-based company at A$1.65 billion, Sundance said today in a statement. The bid is priced at 33 percent more than Sundance’s close on Sept. 30.
Buying Sundance will give Hanlong control of the $4.7 billion Mbalam rail, port and mine project straddling the border of Cameroon and Republic of Congo. Hanlong, which has investments in highway and power projects, said last year it will invest as much as A$5 billion in resource assets to feed China’s demand for commodities.
“A group like Hanlong is the ideal one” to develop the project, Gavin Wendt, a mining analyst and founder of Mine Life Pty. said by phone. “They have a long-term view when it comes to resources -- they have a need for commodities not just now but 10, 20, 30 years down the track.”
Sundance climbed 5.8 percent to 45.5 cents at the 4:10 p.m. close of Sydney trading. Hanlong is also bidding to buy Australian uranium developer Bannerman Resources Ltd. for A$143 million.
China, the world’s biggest metals buyer, is snapping up deposits in Africa, including Democratic Republic of Congo, rated the third-least desirable place to operate a mine, amid a shortage of new copper discoveries.
“The Chinese aren’t as concerned about geopolitical risk,” Warwick Grigor, an equity analyst at BGF Equities Pty Ltd, said by phone from Sydney. “They are prepared to make a much longer term commitment.”
Hanlong’s offer values Sundance at about 7.2 times the value of its total assets, based on data compiled by Bloomberg. That compares with the median of 1.75 times of 10 similar deals since 2004.
There have been $18.5 billion of resources deals by Chinese companies since the start of the year, compared with $20.8 billion for all of last year.
“The substantial financial support needed for this integrated port, rail and mine project will now be available,” George Jones, chairman of Sundance said in the statement. Hanlong is Sundance’s biggest shareholder with a 17.8 percent stake, according to data compiled by Bloomberg.
UBS AG acted as an adviser for Sundance and Bank of America Corp. advised Hanlong.
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