Waratah has advised its shareholders to take no action over the bid, calling it “opportunistic” and saying the price substantially undervalues the company and its assets.
Mineralogy – Palmer’s private company, nicely cashed-up after the sale of magnetite tenements in the Pilbara to Chinese and Korean companies – is offering $C1.41 a share to gain 50.1% ownership of Waratah.
Shares in the coal play closed on Friday at $C1.30 on the Toronto Stock Exchange venture index, down 10c.
Waratah hopes to develop a new 25 million tonne per annum coal mine as well as a 500km rail and a new port, worth $A5.3 billion, in the Galilee Basin in Queensland.
However, its initial plans for port and rail infrastructure were scrapped after the Queensland government, along with Australian Environment Minister Peter Garrett, said developing the proposed port site at Shoalwater Bay would be environmentally unsound.
The planned development area, north of Rockhampton, is part of sensitive wetland areas.
The company said it would be looking at other alternatives but has also launched legal action against the federal government to push ahead with its plans.
In its statement from Friday, Mineralogy said it strongly supported the development of Waratah’s Galilee Basin Coal Project.
However, Mineralogy added that it believed the scope of this project was beyond the coal play, requiring both a major mine development and heavy infrastructure investment.
Mineralogy said that, in contrast, it had “extensive experience in successfully developing large-scale resource projects in Australia” including securing financing and government approvals.
Mineralogy already holds 10 million Waratah shares, or 14% of the company, on a fully diluted basis and last week’s offer represents a premium of approximately 9.4% over the volume-weighted average closing price of Waratah's shares on the TSX-V for the previous month.
To achieve its 50.1% holding, Mineralogy will need to gain acceptances of another 27 million Waratah shares for a total cost of $C38.9 million.
The offer is open until November 7.
Waratah plans to list on the Australian Securities Exchange, initially via CHESS Depositary Interests (CDIs), a vehicle allowing Australian investors to buy Waratah’s Toronto-listed scrip.
Clive Palmer, meanwhile, is also building a new steelmaking material company, Resource Development International, which hopes to raise $A5 billion through an initial public offering later this year and list on the Hong Kong Stock Exchange.
