Lundin looks to get Chariot on the cheap

Lundin Mining (LUN-T) is making a bold move on Chariot Resources (CHD-T).

If it succeeds it will have gained control of Chariot, and its prime copper project Marcona, without forking over a penny.

Lundin has issued a circular to Chariot shareholders urging them to vote out the company’s current board, and vote in six new members, the majority of which have strong ties to Lundin Mining.

The success of such a maneuver will hinge on just how impatient Chariot shareholders have become with management and how much faith they would have with Lundin running the show.

Lundin is doing its best to paint Chariot as a company stalling on development of Marcona with little promise of kicking into a higher gear.

It can paint such a picture thanks to Chariot missing its own estimates for when it would get a feasibility study done on the project.

The company had projected that a feasibility study would be done by the fourth quarter of 2007, but in actual fact, it wasn’t released until April of this year.

A feasibility study on the concentrator needed to process sulphide ore at the deposit, however, has yet to be completed. The concentrator study is at the pre-feasibility study level.

That, however, may not as important as the dissidents would like shareholders to believe, as the mining plan calls for mining of the oxide ore first through a vat leachign system that would produce cathode copper. Concentrate would only be produced two years into production — giving ample time to have a feasibility study completed.

Lundin’s interest in the Marcona project goes back to late 2007, when it bought close to 20% of the company.

It says it was quickly dissatisfied with both Chariot’s share performance and the pace of progress, but was unable to do much about it as Lundin itself became mired in its own financial mess with the collapse of financial markets last year.

But with its own balance sheet in better order, Lundin has now stepped in to a proxy fight with Chariot’s current management team.

Lundin is pitching itself as a team that will be able to bring in the best experts in as quickly as possible to develop a timeline for production at Marcona.

In a statement, Lucas Lundin, Lundin’s chairman said: “Shareholders cannot afford to let current management remain in control and potentially miss what appears to be the start of another period of relatively high copper prices.”

The team of directors favoured by Lundin includes Colin Benner, Donald Charter, Richard Clark, Brian Edgar, Wojtek Wodzicki and Lucas Lundin

Chariot is countering by painting Lundin as merely opportunistic. It says the management team being pushed by Lundin is actually less experienced with a poorer performance record than the team currently at the helm of Chariot.

“If Lundin Mining wants to take control of Chariot, it should make a take-over bid directly to the shareholders of Chariot. Instead they are trying to steal control without paying for it,” Ulli Rath, Chariot’s chief executive said in a statement.

And Rath went on to cast doubt over Lundin’s contention that it has a plan to accelerate development.

“The Lundin Nominees have not articulated a compelling plan for Chariot. The plan for Chariot articulated by the Lundin Directors is so vague that it is meaningless. In addition the action items referred to by the Lundin Directors have already been undertaken by Chariot,” Rath said.

Chariot says development will begin by the end of the year and says that the best option for Chariot shareholders is to vote in the current management team and allow them to devise a strategy to sell the company for a premium.

And that might be a point that Chariot shareholders find the hardest to dismiss.

The timing of Lundin initiating a proxy fight doesn’t allow for a rival bid to come in as shareholders are set to vote on the issue on Sept. 4.

While Chariot shareholders are, no doubt, peeved at the length of time it has taken for the project to get rolling, they would have to be downright irate if they were to toss out the current management team and any chance of a premium along wih them.