Chinese make formal offer for Discovery

CHINESE suitors have made a formal takeover offer for minerals explorer Discovery Metals at a price already rejected by the Discovery board.

Cathay Fortune Corporation (CFC) and China-Africa Development Fund (CADFund) announced on Tuesday that they would offer $1.70 in cash for each Discovery share that is not already owned by CFC.

At $1.70 per share, Discovery Metals is valued at about $830 million.

The offer is subject to acceptance by at least 51 per cent of Discovery shareholders.

Earlier this month, Discovery rejected a non-binding proposal by CFC and CADFund to acquire Discovery shares at $1.70 each.

The Discovery board said the proposal undervalued the company.

"The decision of the Discovery board to refuse access to due diligence and further engagement without any reasonable basis has prompted CFC's decision to bypass the Discovery board and present the offer directly to the Discovery shareholders," the founder and largest shareholder of CFC, Yong Yu said in a statement.

"The Discovery board has not provided any information to justify a valuation above $1.70 per share."

Australian-based Discovery is focused on the exploration and development of the Kalahari copper belt in northwest Botswana in Africa.

The company produces copper at its 100 per cent-owned Boseto copper project.

CFC currently owns 13.78 per cent of Discovery.

CFC and CADFund said their joint offer represented compelling and certain value at an attractive premium, at a time when there was significant uncertainty over the costs and mine expansion plans of the Boseto copper project.

The Chinese suitors said that just three months ago, the Discovery board had issued new shares to institutional shareholders at $1.20 per share.

"This action alone should have suggested that a $1.70 per share offer in cash, a price that is more than 40 per cent greater than the placement price, provided a strong rationale for the Discovery board to engage," they said.

Discovery said on Tuesday that it had received no formal documents from the bidder.

"Accordingly, shareholders do not need to take any action in respect to the proposed offer," Discovery said in a statement.

CFC and CADFund require approval for the offer from the Foreign Investment Review Board of Australia, which they said was expected to be granted in late October.

Shares in Discovery Metals were eight cents higher at $1.73 on Tuesday.

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