Australia | Jul 16 2007
By Chris Shaw
A few months ago when it needed an injection of cash to further advance work on its prospects junior coal player Rocklands Richfield (RCI) entered into a reverse takeover with China Coke and Chemicals, where for an investment of $1.6m in cash and around 100m shares and options it would gain control of a company with an almost half a million tonne a year coke plant in China and access to some needed funding.
Early last month fellow junior Bowen Energy (BWN) entered the fray and made an alternative offer for Rocklands of 10c cash and one of its shares for every two Rocklands shares, which valued it at almost 20c at the time of the offer and around 18c now.
At stake are the coal assets of Rocklands, which include the wholly-owned Hillalong prospect and 60% stakes in the Rocklands and Richfield prospects and which are attractive to Bowen as it has set a target of one billion tonnes of resources.
Drilling at the projects suggests there is an inferred resource at the Hillalong project of around 17 million tonnes of open cut coal and 44 million tonnes of underground coal, while at Rocklands there are measured and inferred resources of more than 28 million tonnes along with additional inferred resources of 150 million tonnes. Richfield is in the early stages of exploration.
Both assets are likely to require additional investment to bring to market assuming they are economic, but the two companies have different approaches for how this could be possible.
For Rocklands it will be via the funds of China Coke and Chemicals and its tie-up with Huaibei Mining, which is the ninth largest coal company in China. Bowen is attempting an Indian connection, negotiating with India’s Bhushan Steel for the creation of a venture to jointly develop assets.
In the latest news Bowen appears to have accepted full control will be next to impossible given the directors and associates of Rocklands hold more than 21% of the shares on issue, so it has dropped its minimum acceptance condition to 50% from 90% previously.
Working in its favour is the fact the value of its offer is easier for investors to understand as it is a straightforward cash and scrip deal rather than a more complicated reverse takeover where Rocklands shareholders would be giving up control of their company while having their stake diluted.
The Bowen Board’s position may have been strengthened by the latest news that China Coke and Chemicals has not exactly been setting the world in fire in performance terms, as its latest results showed turnover down 60% and profit down 95%, this at the same time as the coal market outlook remains favourable.
But whether investors agree a domestic deal is better than something including the magic word of China remains to be seen, so it appears there is more yet to be revealed in what is shaping as an interesting corporate battle. Bowen shares today are down 2.5c at 26.5c, while Rocklands Richfield is trading 1c lower at 21c.