ConsMin is offering 30c cash plus one ConsMin share for every ten Reliance shares held for ordinary shareholders; along with the same cash component with one ConsMin share for every Reliance convertible note held. The bid would be internally funded.
The offer values Reliance shares at 56.5c, representing a premium to the 51c the company was trading at ahead of the bid.
If ConsMin is successful it will add the longed for commodity – nickel – to its portfolio via Reliance’s producing Beta Hunt mine near Kambalda in Western Australia. Production from Beta Hunt in the last quarter was around the 1600 tonne mark, with a decrease forecast once the high grade 1840 pod has been mined.
“Consolidated’s strong balance sheet and cash flow will add significant value to Reliance’s nickel assets, bringing sufficient funding to ensure continued exploration of Reliance’s nickel tenements and to unlock the excellent upside potential at Beta Hunt by accelerating the expansion of existing operations and development of the East Alpha project,” ConsMin managing director Michael Kiernan said.
Kiernan was overseas and not available for comment, but finance director David Macoboy told MiningNews.net he was confident that the offer would be successful. The bidder’s statement, along with Reliance’s target’s statement, is planned to be sent to shareholders in about three weeks.
Macoboy said ConsMin had started talking with Reliance in October and had since conducted due diligence in conjunction with an undisclosed independent valuer.
A resources analyst with Patersons Securities said that while the offer was at a premium based on metal inventory – Patersons’ has a value of 38c for Reliance – ConsMin wasn’t paying too much because of the strategic synergies.
“Based on the current reserve and resource position at Beta Hunt and East Alpha it is a fairly full price and reflects ConsMins’ strategy of diversifying into other carbon fuel materials commodities,” said an analyst.
Macoboy said the future of Reliance directors, including managing director Paul Chapman, had not yet been decided.
ConsMin has said it will provide a $5 million credit facility to Reliance to accelerate its growth program, repayable by mid 2005.
ConsMin already holds a 19.69% stake in Reliance after last week taking an on-market 6.84% and pre-bid acceptance from two undisclosed major shareholders. It has also reached agreement with 71.14% of preference share holders.
Both ConsMin and Reliance remained in a trading halt today.
