Australia’s Discovery Metals Ltd unexpectedly rebuffed a takeover offer led by a Chinese private equity firm valuing the copper miner at A$824 million ($844.31 million), but said it remained open to a higher bid.
Cathay Fortune Corp (CFC), founded by Chinese billionaire Yu Yong, teamed up with the state-backed China-Africa Development Fund (CAD) to make an offer of A$1.70 a share last week. CFC already owns a 13.7 percent stake in the copper miner.
“The directors have advised the representatives of CFC and CAD Fund that if they wish to put a new proposal to the board, the board will consider and assess that new proposal on its merits,” Discovery said in a statement to the stock exchange on Thursday.
The rejection came as a surprise, as the company’s shares last traded at A$1.64, just below the offer price, reflecting the view that investors had expected the deal to go ahead.
Broker price targets before the bid ranged from A$0.80 to A$1.85 a share.
Discovery’s directors said the offer from CFC and CAD failed to reflect the value of the company’s management, operations and expansion plans, exploration potential and what it called the “scarcity value” of the company.
Discovery owns the Boseto project in a region in Botswana that has been the focus of more than $10 billion in copper miner takeovers in the past two years.
Canaccord Genuity analyst Jean Francois Bertincourt, one of the more bullish analysts on the stock, said the company could attract other bids.
Discovery has an asset with substantial production, solid expansion potential and a very long mine life in a politically stable country, he said.
“I’ve got a price target of A$1.85 on the stock. If you apply a 30 percent control premium, there’s still a lot of room to fit another bid,” Bertincourt said.