Tethyan rebuffs Crosby offer (May 27, 2005)

Australian copper explorer Tethyan Copper is calling a cash takeover offer from London-listed merchant bank Crosby Capital Partners “opportunistic,” and says it substantially undervalues the company.

Crosby, based in Hong Kong, has offered A64 per share for Tethyan, a bid that values the company at A$101 million. The bid represents a 32% premium over Tethyan’s previous closing price of A48.5 and Crosby argues that the bid lets Tethyan shareholders take a profit without exposing themselves to technical or country risk.

Tethyan holds the Reko Diq copper project in Baluchistan province, Pakistan. Crosby has suggested Reko Diq’s location in the western corner of Baluchistan, sandwiched between eastern Iran and southern Afghanistan, burdens the project with significant political and financing risk.

The project consists of the H4 oxide project, with an indicated resource of 152 million tonnes grading 0.7% copper and a further inferred resource of 15 million tonnes at 0.7%. H4 is considered a “starter” project for the larger Western Porphyries project, which has an inferred resource of 729 million tonnes at 0.64% copper and 0.39 gram gold per tonne, and for deeper hypogene mineralization on H4 itself, which has an inferred resource of 47 million tonnes grading 0.4% copper.

BHP Billiton (BHP-N) still holds title to the Western Porphyries, subject to a 75% earn-in by Tethyan.

Crosby’s offer hangs on getting 90% of Tethyan’s shares tendered, and on the usual requirements for regulatory approval. Crosby will have to provide a formal offer in a bidder’s statement by July 4.