Bannerman provides update on Hanlong’s offer

While Bannerman Resources (ban-t, bmn-a) says it’s not going “tie its hands down” in a long-term arrangement with Sichuan Hanlong Group, it is still open to an acquisition by the Chinese conglomerate.

Hanlong Mining Investment, a subsidiary of Sichuan Hanlong, has been eyeing Bannerman’s sizeable Etango uranium deposit in Namibia for sometime. In mid-July it offered to buy the junior for A$0.612 per share, in what Bannerman said was a “highly conditional” and an opportunistic proposal given that its share price had fallen considerably in the aftermath of Fukushima. Prior to the Japanese nuclear disaster in March, its shares were hovering around 70¢ but had tumbled within the 30¢-40¢ range when Hanlong made its offer.

Bannerman, which has been routinely updating its shareholders on the bid, said in an Oct. 24 press release that Hanlong’s financer, the China Development Bank, required extra due diligence to gain more certainty surrounding the timing and conditions of a mining licence before it could provide Hanlong with funds. It then explained Hanlong could not say how long the additional work would take or when it would get the green light from its financer and the Chinese government.

“The Chinese development bank is the one that will actually be doing any kind of financing in the near future,” says Bannerman’s investor relations representative Spyros Karellas. “They have a pretty long due diligence process. There are discussions, but you know it takes a lot of time, especially with these guys.”

But, the Namibia-focused uranium explorer doesn’t plan to sit on its hands and wait for Hanlong. It told investors that it was “unlikely” whether it would know if Hanlong could enter a binding agreement with Bannerman within a suitable timeframe that would meet its shareholders’ and the Namibian government’s expectations.

 Bannerman told Hanlong while the door is still open for a “less conditional” proposal, it will focus on discussions with other interested parties. 

Some of Hanlong’s previous terms included a three-month period of exclusivity, which Bannerman shook off as being inappropriate given there was no agreement on price or the conditions of the proposed bid.

Other terms included Hanlong completing due diligence before Sept. 30; a Bannerman board recommendation; and receiving a handful of approvals and support, from major shareholders, institutions and relevant stock exchanges.

“Our board of directors and our management actually said we are engaging others, but we don’t want to just totally tie our hands down here and say that we are going to give you a long-term arrangement,” says Karellas on Hanlong’s proposal. “So, it’s not to say it’s off the table.” 

Due to Hanlong’s long due diligence process, Bannerman has decided it will explore other options.

Karellas wouldn’t say how many other companies Bannerman is currently talking to regarding possible joint ventures or acquisition proposals. But he did mention as long as the price is right, the junior is open to either arrangement to move Etango forward. The 80%-owned project is one of the world’s largest undeveloped uranium deposits, located near Rio Tinto‘s (rio-n, rio-l) Rossing uranium mine and Paladin Energy‘s (pdn-t, pdn-a) Langer-Heinrich mine.

On Oct. 4, Hanlong entered into an A$1.65-billion takeover bid for Sundance Resources (sdl-a), a Perth-based iron ore explorer. This news came on the heels of the Australian Securities and Investments Commission investigating possible inside trading activities by certain Hanlong executives of Bannerman’s and Sundance’s securities.

On the recent Hanlong update, Bannerman’s shares slid nearly 20% or 7¢ to 29¢.