A new complication in the long-running Mt Gibson Iron Ltd bid for Aztec Resources Ltd has emerged with the target revealing it is in senstive negotiations with another party which could result in a defeating condition in the takeover being triggered.
A new complication in the long-running Mt Gibson Iron Ltd bid for Aztec Resources Ltd has emerged with the target revealing it is in senstive negotiations with another party which could result in a defeating condition in the takeover being triggered.
Aztec said its efforts to raise a $100 million banking facility had hit a hurdle due to caveats placed over its Koolan Island project by Australian Royalties Corporation Pty Ltd the vendor of 30 per cent of the project.
Aztec said it was negotiating to remove these caveats - a $1/tonne royalty and an option to repurchase the interest if production did not commnce by June 15 - but warned that buying out ARC may require raising additional equity capital which would trigger the defeating clause in Mt Gibson's bid.
Aztec directors have advised that there are no present discussions with third parties which are likely to result in an alternative proposal being put forward before the current scheduled close of Mount Gibson's offer.
Mount Gibson is due to announce later this afternoon whether it plans to extend its offer or to change any conditions of its offer.
Last month, the Takeovers Panel declined an application from Aztec to declare the takeover offer made by Mt Gibson Iron Ltd unacceptable.
The panel had previously advised Mt Gibson to disclose a forecast net profit after tax for the six months to December 31 2006, in a bidder's statement to Aztec shareholders.
Mount Gibson launched its takeover bid for Aztec in July, offering one Mount Gibson share for every three Aztec shares, which equated to about $248.2 million.
Meanwhile, Aztec is at the final stage of approval with a banking syndicate regarding the provision of finance facilities of $100 million to meet the balance of development expenditure commitments and ongoing working capital requirements associated with its Koolan Island Iron Ore Project.
Aztec closed at 23.5 cents in today's trading.
Below is the full announcement:
Aztec Resources Limited (ASX and AIM code: AZR) ("Aztec") wishes to advise shareholders that it is
now at the final stage of approval with a banking syndicate regarding the provision of finance facilities
of A$100 million to meet the balance of development expenditure commitments and ongoing working
capital requirements associated with its Koolan Island Iron Ore Project.
The A$100 million facility will consist of:
- a senior debt facility of A$54 million;
- a cost overrun facility of A$10 million;
- a working capital facility of A$30 million; and
- an environmental bond facility of A$6 million.
However, an issue has arisen in respect of certain rights held by Australian Royalties Corporation Pty
Limited ("ARC"), the original vendor of 30% of the Koolan Island tenements. These rights include:
7 A royalty of A$1 per tonne for every tonne of iron ore sold from the Project. ARC has recently
lodged caveats over Koolan Island mining tenements to secure this royalty interest.
7 An option for ARC to repurchase its original 30% interest in the Koolan Island tenements for a
nominal sum if production has not commenced from those tenements by 15 June 2007. Under
this option ARC would have the right to exercise its repurchase right if Aztec has not
commenced mining and shipping of a minimum of 500,000 tonnes of iron ore by 15 June 2007.
Provided the current timetable for production and shipping is maintained, Aztec Directors do not
believe this repurchase right will be triggered.
The banking syndicate is not able to finalise the banking facilities unless the risk of ARC exercising its
repurchase right is extinguished and ARC's caveats are removed.
In light of these concerns raised by the banking syndicate, Aztec is in negotiations with ARC to acquire
its royalty (so as to remove the caveats) and to extinguish the repurchase right.
Aztec shareholders should be aware that any transaction with ARC to acquire its royalty may involve
the issue of Aztec shares to ARC. If shares are issued, this may trigger a defeating condition under
the takeover offer for Aztec by Mount Gibson Iron Limited (ASX code: MGX) ("Mount Gibson"). Aztec
will liaise with Mount Gibson in this regard.
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Provided the negotiations with ARC are successful, Aztec believes it will receive credit approval from
the banking syndicate shortly after any agreement is executed with ARC. Credit approval from Aztec's
banking syndicate will allow immediate draw-down of the first tranche of the senior debt facility. The
remainder of this senior debt facility will be available for drawdown as soon as certain conditions
subsequent relating to environmental approvals have been met. These are expected to be met within
the next 3 weeks.
If the negotiations are not successful, then it is likely the banking facilities will not be available to
Aztec. As noted on pages 41 and 47 of Aztec's latest annual report, if Aztec is unable to secure the
provision of finance facilities on or around the end of October 2006, there is significant uncertainty as
to whether the company and the consolidated entity will be able to continue as a going concern.
Due to the ongoing negotiations with ARC, Aztec this morning requested that its shares be placed in a
trading halt, which is to continue after this announcement. It is anticipated that Aztec will make a
further announcement regarding the status of these negotiations with ARC before 10am (EST) on
Monday 23 October 2006.
Takeover Update - Alternative Proposals
As Mount Gibson is due to announce later this afternoon whether it plans to extend its offer or to
change any of the conditions of its offer, Aztec's Directors wish to advise that there are no discussions
with third parties presently on foot which are likely to result in an alternative proposal being put
forward before the current scheduled close of Mount Gibson's offer.
