Chinese tycoon seeks control of Letlhakane uranium project
Mbongeni Mguni | Friday January 17, 2020 14:02
A-Cap shareholders are due to vote on the offer by March and although directors have said the offer is unfair, they also say it is reasonable.
Jiandong’s Shenke Holdings has tabled an offer to Jiangsu Shengen Resources group for its 41% stake in A-Cap. That stake would give Jiandong control of the firm, with the two other major investors holding a collective 34%.
Jiandong already has 12.4% voting power in Jiangsu, the Shanghai-based mining group that invested in A-Cap several years ago and provided a US$5 million loan guarantee from the Industrial and Commercial Bank of China Limited (ICBC).
Information emerging from A-Cap indicates that Jiandong’s deal with Jiangsu breaches a threshold of 20% voting power in A-Cap stipulated in Australia where the uranium developer is registered. “The proposed transaction has the effect that Shenke and Jiandong increase their voting power in the company beyond 20%,” A-Cap directors said in a recent note to investors.
“The Corporations Act contains an exception which allows a person to acquire a relevant interest in a company’s voting shares in excess of the 20% threshold where shareholder approval is obtained.
“As such, completion of the proposed transaction is subject to approval by A-Cap’s shareholders being received at the general meeting.”
Jiandong has offered to clear A-Cap’s loan with the ICBC or alternatively release Jiangsu from the same obligation, in return for the shareholder in the Serule project.
A-Cap directors told investors that their analysis of the offer showed that while it was not fair, it was still reasonable.
“The proposed transaction is in the best interests of the company,” directors said in their note. Chinese firms have held significant interests in A-Cap over the years, as the project has moved closer to production. A-Cap was awarded a 22-year mining licence in 2016 but deferred production citing weak commodity prices. Production is now expected in 2022 from a resource estimated at 367 million pounds.
China’s demand for uranium, meanwhile is expected to double by later this year, an appetite that has sent developers in that country scurrying for equity stakes in projects across the globe. In the proposed deal, Jiandong and another Chinese engineering player, Meng Weijun, also plan to join the A-Cap board, replacing current chair, Angang Shen and another director, Chenghu Zhu. Weijun holds 13.3% in Jiangsu while Shen’s Ansheng Investment Co bought into A-Cap in 2013 and holds a 19.8% stake. Shen has previously lent A-Cap funding for its working capital.