Blumont Group Ltd. named the former chief executive officer of SouthGobi Resources Ltd. as chairman, halting a decline in Blumont shares in Singapore trading after they plunged by a record yesterday.
Alexander Molyneux will buy 135 million Blumont shares and become chairman after the transaction is completed, the company said in a statement yesterday. Molyneux was ousted as CEO of coal miner SouthGobi in September 2012. Prior to that he was managing director, head of metals and mining investment banking, Asia Pacific, for Citigroup Inc.
Blumont jumped as much as 131 percent today, reversing two days of losses that shaved S$4.9 billion ($3.9 billion) from its market value, before closing unchanged. The appointment may assist Blumont’s expansion in minerals and energy after the company said this month it has held talks with 20 potential takeover targets or partners since December.
“The new development would appear that Blumont is doing everything they can to instill confidence,” said Kelly Teoh, a market strategist at brokerage IG Markets in Singapore. “This should stem further selling and stabilize the share price.”
Blumont shares closed at 13 Singapore cents, giving it a market value of S$336 million. Before the rout began Oct. 3, the stock had advanced more than tenfold this year.
The final price to be paid by Molyneux will be between 20 Singapore cents and 60 Singapore cents a share, Blumont said. The transaction is expected to close within 30 days.
“Where we have purchased the stock, the company has a lot of upside,” Molyneux, who is based in Hong Kong, said today in a phone interview. “It’s about creating value by feeding projects that otherwise don’t have good access to capital, creating value by reducing risk through a portfolio approach to investing in different companies and commodities.”
Blumont last week scrapped a deal to buy Australia’s Cokal Ltd. for S$146 million the same day it announced the plan after the share plunge on Oct. 4 affected the commercial terms discussed with the the target. Cokal plunged 20 percent in Sydney trading today.
Trading in the Singapore stock was halted on Oct. 4 along with commodity investors LionGold Corp. and Asiasons Capital Ltd. by the Singapore Exchange as it requested explanations for the price declines. The exchange said Oct. 6 shares of the three companies have been declared designated securities, prohibiting investors from short-selling them.
Molyneux was fired by SouthGobi, which mines steelmaking coal in Mongolia, eight days after Aluminum Corp. of China Ltd. dropped a takeover bid. The offer was pulled after Mongolia passed a law restricting foreign state-owned companies from controlling key assets.
Blumont has stakes in Azarga Resources Ltd. and Celsius Coal Ltd. and Molyneux is chairman of both companies, it said. The company will also look to acquire assets in agriculture, such as potash and phosphate, as well as in oil and gas, Molyneux said today, adding Blumont has no immediate plans to raise capital.
“This is going to be a mini BHP,” Molyneux said, referring to BHP Billiton Ltd., the world’s biggest mining company. “It’s Asia’s first major diversified natural resources company.”