First Quantum extends Adastra bid

With less than one-third of Adastra Minerals‘ (AAA-T, AAA-L) fully diluted common shares handed over by the Mar. 31 deadline, First Quantum Minerals (FM-T, FQM-L) has again extended its hostile takeover bid until Apr. 18.

Some 26 million, or 30.1%, of Adastra’s shares have been tendered to First Quantum’s sweetened bid of $2.65 in cash or one of its own shares for every 14.76 Adastra shares tendered. The value of the share exchange rings in at $3.25, based on First Quantum’s closing share price of $48 in Toronto on Mar. 31.

The cash portion of the deal is capped at $36.3 million, while the limit to shares is 4.9 million. Assuming full pro ration, the offer equates to 0.057 of a First Quantum share accompanied by 42 for each share of Adastra. At that rate, the bid values Adastra shares at $3.16 apiece. Adastra closed at $2.88 in Toronto on Mar. 31.

First Quantum says it hasn’t taken up or paid for any of the submitted shares, as the minimum tender requirement of more than 50% has not yet been met.

Judging by the acceptance level, First Quantum’s sweetened bid seems to have failed to sway any of Adastra’s major shareholders. Earlier this year, M&G Investment Management, Adastra’s largest shareholder at 14.8%, company founder Jean-Raymond Boulle, with a 7.7% stake, Merrill Lynch Investment Managers, which holds a 5.2% interest, and other major shareholders who together own more than a 50% stake, joined the company in rejecting First Quantum’s original 1-for-17.5, all-share bid.

Instead, Adastra plans to sell a 14.9% stake in the Kolwezi copper-cobalt tailings project in the Democratic Republic of the Congo to Mitsubishi (MSBHY-O). That deal was also recently 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.

Meanwhile, Adastra continues to advance Kolwezi as it fends off First Quantum. The company recently gave the go-ahead for early site works, including geotechnical excavation work to determine foundation conditions for the plant, tailings dam and rail and road routes. Negotiations are underway with contractors for earth works. Work is slated to begin before the start of the rainy season in November.

Adastra’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 km 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 mineralization was observed to a depth of 60 metres below surface in the deepest workings in the area.

Adastra obtained a 5-year, renewable subsurface exploration 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.Shares in Adastra were 7 better at $2.95 in afternoon trading in Toronto following news of the extension on Apr. 3; First Quantum was 89 higher at $48.89.