23 August 2019
PanAust operates a copper and gold mine in Laos. The latest offer values the Australian miner at A$1.1 billion. Photo: Bloomberg
PanAust operates a copper and gold mine in Laos. The latest offer values the Australian miner at A$1.1 billion. Photo: Bloomberg

Guangdong Rising makes new, lower bid for PanAust

Guangdong Rising Assets Management has offered US$850 million to buy out copper and gold miner PanAust Ltd.

The price is about a quarter less than its offer less than 10 months ago, underscoring the steep decline in mineral commodities, Reuters reported.

PanAust said on Monday it had received a letter from 22.5 percent shareholder Guangdong Rising, saying it plans to offer to buy all remaining shares at A$1.71 each, valuing the miner at A$1.1 billion (US$852 million). The offer would be 26 percent below the A$2.30 a share it offered last May.

“We are seeing the Chinese take an active role in the Australian sector, particularly in resources,” said Gavin Wendt, an analyst at Sydney-based MineLife. “These represent long-term investments.”

Hong Kong billionaire Li Ka-shing’s Cheung Kong Infrastructure Holdings Ltd. (01038.HK) bought gas pipeline company Envestra Ltd. for A$2.2 billion last year, while Chinese investors have also been active in property markets.

PanAust shares, which have fallen in line with weaker copper and gold prices, jumped 40 percent to match the latest offer price, a four-month high for the stock.

State-owned Guangdong Rising first approached PanAust last April and then sweetened its offer in May.

PanAust, which rejected the May bid as too low, said it would consider the fresh approach but noted it was made at a time when PanAust’s stock as well as copper and gold prices are near five-year lows.

PanAust mines copper in Laos and paid US$125 million in late 2013 for the rights to the Frieda River copper project in Papua New Guinea. It shed 5 percent of its workforce in January as copper traded around its lowest level in half a decade.

Guangdong Rising urged shareholders to accept the all-cash offer, warning that PanAust may need to raise additional capital to get the Frieda River project into production, potentially sending its shares lower.

Analysts expect PanAust to spend between US$1.5 billion and US$1.8 billion to develop a mine producing 100,000 tons of copper annually from Frieda River and 160,000 ounces of gold.

“Given the time that’s elapsed since the last bid and the fact it’s coming from a Chinese enterprise, it’s unlikely PanAust will see another offer coming out of the woods,” MineLife’s Wendt was quoted as saying.

PanAust said it is being advised by Rothschild and Herbert Smith Freehills in relation to the third Guangdong Rising approach.

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