Canadian Royalties urges rejection of Jien offer
“We feel this is a lowball bid”
Canadian Royalties Inc.’s board of directors say their shareholders and investors should reject any offers by Jien Canada Mining Ltd. to buy them out.
Earlier this month Jien Canada Mining Ltd, a joint venture between the Chinese mining giant Jilin Jien Nickel Industry Co., Ltd. and Goldbrook Ventures, a Canadian mining company, offered $148.5 million in an all-cash takeover bid for Canadian Royalties, which has been trying to develop a nickel mine project in Nunavik.
The bid comes after Canadian Royalties’ plans to develop the Nunavik Nickel mine fell apart last year, a casualty of the company’s legal disputes with its former partner, the decline in metal prices, logistical problems and bad economic times.
Jien said it would pay Canadian Royalties’ shareholders 60 cents a share and debenture holders $600 for every $1,000 of loans — not nearly enough money, said Glenn Mullan, Canadian Royalties’ chief executive officer and chairman of the board, in an Aug. 25 teleconference.
“This bid by Jien is as hostile as it gets,” he said, referring to the fact that a takeover offer is called “hostile” when a company, like Jien, makes an offer without any approval or consent.
Mullan criticized Jien’s takeover bid as “incredibly opportunistic” and “financially inadequate.”
“Jien can pay substantially more,” Mullan said, noting that once the Nunavik Nickel project is in production, Canadian Royalties would produce almost as much nickel as Jilin Jien’s operations in China.
Mullan said Jien just wants to add to its production base without paying.
“We feel this is a lowball bid, and they could put more money on the table,” Mullan said.
Jien’s offer doesn’t recognize the “strategic value” of the future Nunavik Nickel mine, Mullan said, because its offers “substantially undervalue” Canadian Royalties, which has sunk $320 million into the development of the mine.
“We strongly believe that we have established Nunavik Nickel as a large-scale and low-cash cost project located in one of the world’s premier mining jurisdictions and certainly the best in Canada,” said Mullan, pointing to the success of the Raglan nickel mine, located next door to Canadian Royalties’ property.
Mullan also said Jien’s offers were “highly conditional” and could risk not being approved by Chinese officials.
Canadian Royalties’ board is “aggressively pursuing” deals with other possible buyers or partners and would have a proposal out within 60 days, Mullan said.
Jien’s offer remains on the table until Sept. 15.