Discovery Metals Slumps After Cathay Abandons Bid: Sydney Mover

Feb. 4 (Bloomberg) -- Discovery Metals Ltd. fell to the lowest price in five months in Sydney trading after Chinese private equity firm Cathay Fortune Corp. said it won’t proceed with a A$830 million ($866 million) takeover bid.

Discovery Metals, which has a copper mine in Botswana, dropped 8.2 percent to 95.5 Australian cents at the close of trading in Sydney. That’s the lowest since Sept. 6. The Brisbane, Australia-based company is trading 44 percent below Cathay Fortune’s A$1.70 a share offer.

Cathay Fortune Investment Ltd., the bidding group that consists of Shanghai-based Chinese billionaire Yu Yong’s Cathay Fortune and partner China-Africa Development Fund, will allow its bid to lapse, it said late Feb. 1 in a statement. The decision comes after a downgrade in reserves and lower-than-expected ore grades at Discovery Metals’ Zeta deposit in Botswana. The offer will close Feb. 15.

Discovery said last month that the total copper metal content at the Zeta mine was 13 percent lower than its initial estimate and the sulphide-material grade 15 percent less than forecast. It also said that its cash cost for the six months ended Dec. 31 was $4.28 a pound (0.45 kilograms), compared with the $1.28 a pound average estimated in its feasibility study, because of lower ore grades and higher energy costs.

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net