Bacanora Minerals received an unsolicited non-binding indicative proposal from Rare Earth Minerals, which it rejected.
On Friday (September 30), it was announced that Bacanora Minerals (TSXV:BCN) had received an unsolicited non-binding indicative proposal from Rare Earth Minerals (LSE:REM) which it rejected.
In the press release, it states that the proposal conceived an all-share merger of the two companies, with Rare Earth Minerals acting as the acquiring entity and issuing new shares of Rare Earth to shareholders of Bacanora.
Rare Earth Minerals holds a 19.8 percent interest in Bacanora, a company that describes itself as a world class lithium-carbonate operation focusing on the development of the Sonora Project in Mexico.
“The Board of Bacanora strongly rejects the proposal believing it significant undervalues the company and jeopardizes Sonora’s development path to production,” the press release reads.
On September 20, Rare Earth Minerals acquired 4.5 million ordinary shares from an existing shareholder at a price of of 100p per share. The release also suggests that the offer would dilute near-term and the life of mine cash flow for non-Rare Earth Minerals shareholders.
In March, a prefeasibility study was conducted, noting that 83.6 percent of the Sonora plant feed is expected to originate from Bacanora’s 100 percent owned La Ventana concession over a mine life of 21 years.
James Leahy, interim non-executive chairman of Bacanora said that the proposed offer is “opportunistic and materially undervalues Sonora.”
“The Bacanora team has made excellent progress in successfully de-risking and advancing Sonora, and at the same time has successfully raised capital from blue chip institutions, who are fully supportive of progress made to date and management’s ability to deliver Sonora as the world’s next major lithium mine,” he said in the release.
Leahy continued, “in our view, as well as undervaluing the Company, the proposed offer has the potential to impede the project’s development going forward.”
In a seperate press release, Rare Earth Minerals confirmed it had approached Bacanora with a merger proposal, and noted that a further announcement would be made in due course, if appropriate.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.