Vancouver’s SouthGobi Resources Ltd. (TSX:SGQ)(HKSE:1878) announced Monday that Aluminum Corporation of China Ltd. (CHALCO) intends to make a takeover bid for up to 60% of the issued and outstanding common shares of SouthGobi.
Ivanhoe Mines (TSX:IVN)(NYSE:IVN)(NASDAQ:IVN) currently owns 104,807,155 shares of SouthGobi, approximately 57.6% of the company.
Ivanhoe announced Monday it has entered into a lock-up agreement with CHALCO and has agreed to tender all of its SouthGobi shares on a pro-rata basis.
Depending upon the uptake of the offer by other SouthGobi shareholders, Ivanhoe could receive up to approximately $889 million from the sale of all of its shares in SouthGobi.
Ivanhoe chairman David Huberman said, “Ivanhoe's board, in conjunction with our financial and legal advisers, has determined that the value offered by this transaction is an excellent opportunity for our shareholders to realize significant value through our creation of what has become one of the fastest growing coal producers on China’s doorstep.”
In conjunction with the proportional offer, CHALCO and SouthGobi have entered into a co-operation agreement whereby SouthGobi will have the right to offer up to 100% of its salable coal to CHALCO and CHALCO will have the obligation to purchase the coal at market prices for a period of 24 months.
Additionally, CHALCO will assist SouthGobi to procure electricity for its Mongolian business operations either through a direct connection to grid power or through development of a conveniently located power plant.
CHALCO will also provide support to SouthGobi's coal-haul highway project.
At press time, SouthGobi’s shares were trading up $1 on the day to $7.60.
