Continuing its acquisition spree for the world's natural resources to fuel the development of the its fast-growing economy, another state-owned Chinese company, CNNC Overseas Uranium Holding Ltd (CNNC Overseas), an indirect wholly-owned subsidiary of China National Nuclear Corporation (CNNC) is set to acquire Canada's Khan Resources Inc (Khan), a Mongolia-focused uranium mine developer, for approximately C$56.5 million ($53 million).
Khan said yesterday in a statement that it had entered into a definitive agreement with Beijing-based CNNC Overseas, under which the latter had agreed to buy all of Khan's outstanding common shares for C$0.96 per share in an all-cash deal.
Toronto-based Khan Resources Inc is engaged in the acquisition, exploration and development of uranium properties. Its current activities are focused in the Dornod province in the northeastern part of Mongolia through its subsidiary Central Asian Uranium Company Ltd (CAUC). Khan holds interests in the main Dornod uranium property, licensed for mining, and in an adjacent property, for exploration.
Khan currently owns 58 per cent stake in CAUC, while Monglolian state-owned company MonAtom LLC owns 21 per cent and the remaining 21 per cent is held by state-owned Russian uranium mining company Atomredmetzoloto JSC (ARMZ) through its subsidiary, JSC Priargunsky Industrial Mining and Chemical Union.
Earlier in November, ARMZ had launched a hostile take-over bid for Khan at a price of C$0.65 per share, which was rejected by Khan's Board on the grounds that it attempted to take advantage of the regulatory uncertainty in Mongolia and undervalued the company.
CNNC Overseas' offer is 48 per cent higher than the ARMZ bid and represents approximately 118 per cent premium to the closing price of Khan's shares prior to ARMZ bid, the statement said. The shares in Khan were traded at C$1.03 yesterday in Toronto.
Khan's president and chief executive officer Martin Quick said: ''The CNNC Offer is far superior to the unsolicited ARMZ bid."
"We look forward to working with CNNC to build upon the progress we have made in Mongolia towards establishing a stable platform for developing the Dornod uranium project and bringing it into operation,'' Quick added.
Under the terms, CNNC Overseas holds the right to match any superior offer made by another bidder. Further, CNNC Overseas and will be entitled to a termination fee of C$1.6 million if the deal is not through, in certain circumstances.
The Dornod property was earlier worked upon by the former Soviet Union. Khan plans to develop and operate the mine to produce approximately 3.5 million pounds (approximately 1,600kg) of uranium oxide for over 15 years. The reserves could grow significantly based on further exploration.
Further to passing of a new nuclear energy law by the Mongolian government in last July, CAUC's mining licence was temporarily suspended, About a fortnight ago, Khan said through a statement that a settlement has been reached with the Mineral Resources Authority of Mongolia (MRAM) whereby the suspension has been terminated.
However, Nuclear Energy Authority, the government body responsible for nuclear policy implementation in the country stated that Khan's announcement on lifting of the mining licence ban was ''misleading'', as certain statements of the release contradicted with the new law.