The Aluminium Corporation of China Limited’s (Chalco) proportional takeover of SouthGobi Resources has been extended by an extra 30 days, to allow the Mongolian government to review the transaction’s terms and conditions. The extension means Chalco must make a bid for up to 60% of the company via a takeover bid circular to all SouthGobi shareholders on or before September 4.
In April, China’s largest aluminium producer launched a bid for a proportional takeover of SouthGobi Resources, offering Can$8.48 each for the company’s issued and outstanding common shares.
SouthGobi’s major shareholder Ivanhoe Mines signed a lock-up agreement with Chalco in which it promised to tender all of its shares during the proportional offer period. Ivanhoe and Chalco confirmed they will cooperate with the Mongolian government to ensure any requirements under the country’s new strategic foreign investment legislation are satisfied, which has prompted the takeover extension.
A special committee of independent directors at SouthGobi will consider the proportional offer as well as legal counsel and an independent financial advisor. The company’s shareholders have been advised to wait until they receive recommendations from the special committee before taking any action.
The two companies have also signed a cooperation agreement in conjunction with the takeover bid. Chalco’s obligations under the agreement will become effective upon its acquisition of a shareholding in SouthGobi.
Benefits of the agreement between the two include coal offtake by Chalco, which will be obligated to purchase 100% of SouthGobi’s saleable coal at market prices for a period of 2 years. CHALCO will also assist SouthGobi to procure electricity for its Mongolian operations, including the flagship Ovoot Tolgoi coal mine, and provide support for its coal-haul highway project.
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