Nordgold-Shandong bidding war intensifies on ‘misleading’ statement from Cardinal

A long-running battle between Nordgold (LSE: NORD) and China’s Shandong Gold Mining over Cardinal Resources (ASX: CDV) has taken a legal turn after the Russian miner made a fresh application to Australia’s Takeovers Panel that accuses the takeover target of misleading shareholders.

Nordgold, which first approached Cardinal in March with an unsolicited A45.7¢ (US32.6¢) per share bid, put forward a “final and best offer” for Cardinal on Oct. 23. The bid, which the Moscow-based miner said on Oct. 26 it won’t sweeten, matched Shandong’s final A$1 (US71¢) per share offer.

Cardinal’s board, which has openly shown its preference for the Chinese bidder, qualified Nordgold’s move as “an attempt to cruel the auction for control of Cardinal, and has significant potential to deprive Cardinal shareholders of additional value.”

It added that its financial advisers believed Nordgold had technically made a higher competing offer after Shandong made its best and final bid. As such, Cardinal said, Shandong could legally depart from the statement and raise its offer price.

The Australian junior told shareholders that accepting Shandong’s offer was the “only realistic way in which the auction will be re-enlivened.”

It also said it had 28 letters from shareholders representing 19.38% of the stock, flagging their intention to accept Shandong’s offer.

Cardinal added on Oct. 26 that it had also received another four letters from investors holding 3.43% of the stock stating they support Shandong’s bid, which has now been extended to close on Dec. 31, unless there is a higher offer.

Nordgold, controlled by Russian oligarch and steel billionaire Alexey Mordashov, alleges Cardinal’s announcement on Oct. 23 was “materially misleading,” as it suggested that a higher offer from Shandong could be unlocked.

Cardinal was forced to clarify that while Shandong may have an option to increase its final offer, it was not a given.

Wording and loopholes

So far Nordgold has made two representations to the Takeovers Panel seeking remedial offers to address market uncertainty.

The Russian gold major is concerned about the wording of a Cardinal announcement on Oct. 21, which said Nordgold had “made a higher competing offer.”

Nordgold told the Takeovers Panel that Cardinal’s announcement and advice received by shareholders indicated that Shandong could depart from its commitment that the A$1 per share offer was “best and final in the absence of a higher competing offer.”

Cardinal’s board rejected the claims, saying that while Shandong had benefitted from matching rights and a substantial break fee through the process, Nordgold had been in a position to increase its offer at any time.

Eyes on Ghana

The main reason behind the two bidders contest for Cardinal is the Australian miner’s 5.1-million-oz. Namdini gold project in Ghana.

A feasibility study on the asset estimated that it will produce about 4.2 million oz. gold over a mine life of 15 years. Nearly 1.1 million oz. will be generated in the first three years of operation.

Initial capital costs for Namindi were forecast to range from US$275 million and US$426 million, depending on the project’s scale.

Nordgold, which acquired many of its major assets during the 2008-2009 financial crisis, claims it is not only offering better terms for Cardinal’s shareholders, but that it also has a track record of best practice operations in West Africa.

The company owns several gold mines in Africa, including Bissa in Burkina Faso and Lefa in Guinea. It also operates in Russia and Kazakhstan.

— This article first appeared in MINING.com, part of Glacier Resource Innovation Group.