Chinese billionaire Yu Yong’s Cathay Fortune Corp. said it’s willing to make a cash takeover offer for Discovery Metals Ltd., subject to the Australian copper producer abandoning a planned share sale.
Cathay and bidding partner China-Africa Development Fund in February abandoned a A$830 million ($853 million) hostile bid, offering A$1.70 a share, after a downgrade of the Brisbane-based company’s mine in Botswana. Discovery’s shares closed at 34 cents on April 18 and the company has since been in a trading halt pending a statement on its financing.
“We are of the opinion that if Discovery progresses with the current financing arrangements, it is likely that it may be forced into receivership in the near future,” Cathay Fortune Group said today in an e-mailed statement. Cathay is “willing to put a binding cash proposal to the board to acquire Discovery subject to the proposed equity raising not proceeding.”
Discovery yesterday asked to extend its trading halt until April 26, ahead of an announcement on a planned share sale, without specifying the amount. Discovery may seek to raise about A$75 million through an equity placement, according to the statement from Cathay, its second-biggest shareholder.
Discovery didn’t immediately respond to a phone call requesting comment on the size of its share sale.
Mining companies are under pressure from falling revenues as commodity prices decline, following a decade-long boom. Discovery’s market value has declined to A$166 million, after rejecting Cathay’s A$830 million offer as too low.
Cathay said today it would waive exclusivity arrangements as part of its renewed takeover proposal “to help maximise possible bidder tension for the benefit of all shareholders,” requesting Discovery’s board to respond by April 26.
Discovery said in March it planned to raise $200 million to $250 million to replace existing debt linked to its Botswana project.