Griffin Mining pulls plug on offer for Ivernia

In an unexpected move, Griffin Mining (GFMIF-O, GFM-L) has withdrawn its unsolicited takeover offer for lead miner Ivernia (IVW-T, IVWFF-O).

In a statement April 3, Griffin Mining explained that Ivernia’s board had through a note issue, effectively entrenched its largest shareholder and “insider,” Sentient Global Resources Fund, as the controlling shareholder in the company.

The terms of Ivernia’s convertible debt and other related transactions were permitted to proceed on the basis of the Toronto Stock Exchange’s decision to grant an exemption from TSX minority shareholder approval requirements for non-arm’s length transactions and for transactions exceeding specified levels of dilution.

Sentient Global Resources Fund was issued secured convertible notes where the conversion price was cut from US$1.08 per share to 11¢ per share “thereby entitling it to acquire 199.1 million shares, presenting approximately 111% of the current outstanding shares of Ivernia and effective control,” Griffin outlined in a press release.

The term was also extended by four years to 2013; the interest payable increased from 6% to 8% per year; and the notes became due and payable “on any “change of control” of Ivernia.”

In a statement Griffin noted that actions taken by Ivernia’s board “have resulted in the current and future control of Ivernia being delivered to a related party with latent massive dilution of its share capital without the approval of Ivernia’s shareholders or allowing the shareholders to be given the opportunity to consider a number of alternative proposals put forward by Griffin.”

Griffin added that Ivernia had applied for exemption from shareholder approval requirements on the grounds of “financial hardship,” despite the fact “that Sentient itself was the major creditor of Ivernia imposing the “financial hardship;” [and] that Griffin had advised of its intention to make an offer to purchase all of the outstanding shares of Ivernia at a 25% premium to market and had indicated it would refinance Ivernia on the same basis as Sentient but at a 36.4% premium to the conversion price offered by Sentient in the Notes.”

For its part, Ivernia said that certain statements Griffin has made are “false or misleading” and that it would respond in more detail to Griffin’s allegations “in due course.”

Griffin Mining, a Bermuda-based mining and investment company, offered 15¢ per Ivernia share in a deal valued at about US$27 million. The offer represented a 25% premium over Ivernia’s closing price on March 24, the day prior to the announcement of the bid, and a 27.4% premium over the 20-day average trading price of Ivernia’s shares.

Griffin said at the time that its substantial cash balances and no debt would enable it to bring Ivernia’s idled Magellan mine back into production.

The Magellan lead mine, about 30 km west of Wiluna in Western Australia, will account for about 2% of the world’s lead mine production when it goes back into production, Ivernia says.

In Toronto at presstime Ivernia was trading at 13¢ per share. The company has a 51-week trading range of 4¢-$1.52In London, Griffin Mining was trading at £21.75 per share.