Sundance Resources agrees to lower offer from Hanlong Group after year-long courtship

Australian miner Sundance Resources on Monday said it has accepted a lower takeover offer worth A$1.37 billion (US$1.42 billion) from China’s Hanlong Group, a move that could potentially conclude a deal that has dragged on for a year.

The two firms agreed to a price of 45 US cents a share compared with 57 US cents earlier as iron ore prices hover near a three-year low.

Mining deals have cooled as demand from China falls, prompting global miners to cut jobs and put expansion plans on hold as they focus on arresting a slide in profits.

“The lower price just reflects the nature of the market. Buyers can call the terms now,” James Wilson, a senior mining analyst at RBS Morgans said.

“Shareholders should be happy given the market outlook and the other alternative which is for Sundance to raise billions to develop the mines,” he said.

The revised deal values Sundance at 40 US cents a tonne of iron ore resources compared with about 60 US cents for developers and A$3 for producers, analysts said. Sundance’s assets are in Africa and the company will need significant capital to reach the production stage, they said.

“The board believes that the revised offer is worthy of putting to shareholders in light of key considerations,” Sundance chairman George Jones said in a statement, referring to weakening markets since the deal was first agreed last October.

The deal, which still needs funding support from China Development Bank and final approvals from the Cameroon and Congo governments, is expected to be completed by mid-December, Sundance said.

Shares in Sundance, which last traded on July 31 at 33.5 US cents, are scheduled to resume trading on Monday. The shares were halted ahead of Chinese regulatory approval of the deal.

The suspension was extended as the two firms haggled over the price after Chinese regulators stipulated a “reasonable acquisition price” as a condition for approval.

Hanlong already owns 17 per cent of Sundance and wants Sundance for its US$4.7 billion Mbalam iron ore project on the border of the republics of Congo and Cameroon in western Africa. The region is seen as a major new source of iron ore that could cut China’s dependence on Australia and Brazil.
The protracted deal adds to a tumultuous two years for Sundance.

In June 2010, its entire board of directors was killed in a plane crash near the Mbalam project.

A new board and management were appointed before the Hanlong bid in July last year.