Adastra sticks to its guns

Adastra Minerals (AAA-T, AAA-L) continues to thumb its nose at the hostile advances of First Quantum Minerals (FM-T, FQVLF-O, FQM-L), urging shareholders to not submit their shares to a new cash bid of $2.65-per-share.

The new bid also carries an improved share-exchange alternative of one First Quantum share for every 14.76 Adastra shares tendered, compared with the 17.5 shares required under the original offer launched on Jan. 18.

“Having reviewed First Quantum’s revised and final offer, the Board is of the unanimous view that it is inadequate and recommends that Adastra shareholders reject the offer by not tendering,” said Adastra chairman Bernard Vavala in aprepared statement.

Instead, Adastra is touting its proposed sale of a 14.9% stake in the Kolwezi copper-cobalt tailings project in the Democratic Republic of the Congo to Mitsubishi (MSBHY-O). That deal has also been sweetened, boosting Mitsubishi’s entrance fee by 20% to US$45 million. The Japanese trading company’s share of costs (up to project financing) would also increase by US$400,000 to US$2.6 million. Mitsubishi would continue to provide project loans and guarantees.

Adastra says the Mitsubishi deal values Adastra’s fully diluted shares at $3.01 apiece; assuming full pro ration, First Quantum’s bid rings in at $2.92 per share (based on First Quantum’s closing share price in Toronto on Mar. 23). Adastra shareholders who tender to the offer will be eligible for First Quantum’s recently announced dividend of 26.5 per share, payable on May 10. A recently completed definitive feasibility study of Kolwezi pegged the net present value of Adastra’s 65% stake at $3.07 per fully diluted share, at a 14% real discount rate.

Adastra says First Quantum’s new bid not only fails to fully value its stake in Kolwezi, but fails to attribute value to the company’s other assets, including the subsurface exploration rights at Kolwezi.

Adastra obtained the 5-year, renewable licence late last year. It covers the entire 62-sq.-km tailings project area including the formerly producing Kingamyambo, Kananga West, Kananga East and Clippe Nord deposits.

The company’s first pass at underground testing at Kolwezi recently met with some success. Thirty-two 1-metre channel samples collected from artisanal pits in Kananga West area all returned anomalous copper and cobalt values.

Highlights include 17 metres averaging 0.7% cobalt and 0.19% copper, including 1 metre of 6.35% cobalt and 0.41% copper, 7 metres of 0.27% cobalt and 0.08% copper, and 8 metres of 0.31% cobalt and 0.11% copper.

The samples were collected down dip of the pit mineralization owing to safety concerns, and thus indicate lateral continuity both across and along strike.

Most of the 25, 2-metre channel samples across the Kananga quarry yielded anomalous values, with the best result running 50 metres of 0.32% cobalt and 0.1% copper, including 12 metres of 0.94% cobalt and 0.2% copper.

Four of five 1-metre channel samples from the West Kingamyambo pits, 2 km to the west returned 0.08% to 0.42% cobalt, with one sample containing 0.29% copper. Chip sampling 2 kmn to the south at the GH pits yielded 0.09% to 0.25% cobalt and 0.36% to 1.37% copper.

Exploration operator ACA Howe International suggests drill testing of a 1.4-km-by-50-metre area between the Kananga quarry and the Kananga West pits. Subvertical, east-west striking mineralizsation was observed to a depth of 60 metres below surface in the deepest workings in the area.