Discovery Plunges as Cathay-Led Group Extends Bid: Sydney Mover
Discovery Metals Ltd. (DML), the subject of a A$830 million ($869 million) hostile bid by a Cathay Fortune Corp.-led group, was headed for its biggest drop in 3 1/2 years in Sydney after the bidder extended its offer period for a third time and sought more discussions.
The stock fell as much as 12 percent to A$1.15 and traded 10 percent lower, poised for its biggest decline since April 2009, as of 1:58 p.m. local time. The benchmark S&P/ASX 200 Index gained 0.2 percent. The lowest intraday level today is 32 percent below the A$1.70 apiece offer price.
Cathay Fortune, a private equity firm founded by Chinese billionaire Yu Yong, extended its offer period by seven days to Feb. 15 because it wants more time to study concerns over a downgrade in reserves and lower-than-expected ore grades at the Zeta deposit in Botswana, it said today in a statement. Cathay Fortune’s cash bid went hostile in October after Discovery’s board rejected the offer as too low.
Discovery said in a Jan. 23 statement 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.
“The new and material disclosures included in the second supplementary target’s statement raise material concerns,” Yu Yong said in today’s statement. “The extension will provide time for Cathay Fortune Investment Ltd. to discuss with Discovery its requirement to conduct appropriate due diligence in order to understand and address these concerns.”
Cathay Fortune Investment is the bidding group that consists of Shanghai-based Cathay Fortune Corp. and partner China-Africa Development Fund. Buying Discovery would give the bidders a copper-silver mine in Botswana with an annual capacity of 36,000 metric tons of copper and 1.1 million ounces of silver.
To contact the reporter on this story: Soraya Permatasari in Melbourne at firstname.lastname@example.org