Guangdong Rising Assets Management Co., Makes $1.4B Bid for Miner PanAust

The long time supportive shareholder of Miner PanAust, Guangdong Rising Assets Management (GRAM), is heating things up. The 23 per cent shareholder is making for a bit of a volatile trading scene with its proposal of a $1.4 billion (A$1.5) takeover bid.

Initial share prices were marked at $2.20 and have now risen to $2.30 per share in the discussions that have since followed the Guangdong Rising Assets Management (GRAM) proposal.

This takeover bid might be able to gain even greater traction and strength seeing as PanAust has reported that the bid itself has already materially undervalued its copper and gold assets.

The proposal from 23 per cent shareholder, Guangdong Rising Assets Management (GRAM), initially started at A$2.20 a share, and was increased to A$2.30 a share in subsequent discussions. Guangdong Rising Assets Management Co. is a state-owned Chinese investment group, and offered to take control of PanAust Ltd. makes for yet another aggressive move made by China within the world marketplace.

Guangdong Rising’s proposed offering of A$2.30 per share in the conditional proposal represents a 46 percent increase from the last close experienced by PanAust. Even with the significant increase over the last closing price, there was some hostility experienced when PanAust declined on the offer, stating it was too low. However, PanAust did concede in providing Guangdong Rising with access to its financial information. These events combined to influence the market in a way that led to an increase of 35 percent today in Sydney trading.

If Guangdong Rising is allowed to purchase PanAust, they would win control of Laos based mines. They would also gain control over the Frieda River project in Papua New Guinea. The Frieda River project is considered one of the world’s largest undeveloped copper and gold deposits, which could give PanAust significant support in asking for a higher share price. PanAust agreed last year to buy Glencore Xstrata Plc (GLEN)’s stake in Frieda River, estimating the development costs at as much as $1.8 billion.

“It’s probably more likely those projects will go ahead under a new ownership,” commented Gareth James, a Sydney-based analyst with Morningstar Inc. A leading challenge that PanAust could be up against is the pursuit of sufficient funding for these projects. However, on the flip side, Guangdong Rising “can just go ahead with those projects as they have access to capital, and that removes the uncertainty,” said James.