Bacanora Minerals (CVE:BCN) has rejected a merger proposal from its fellow lithium explorer and shareholder Rare Earths Minerals (LON:REM).
REM, which already holds a 19.8% stake, has suggested a share-based reverse takeover that values each Bacanora share at 88.5p, but the board of the Canada-listed company says this substantially undervalues its assets and potential
Bacanora's board noted that only last week REM bought 4.5 mln shares at 100p per share in cash and added the offer would dilute near term and life of mine cash flow for non-REM shareholders.
Sonora, in Mexico, is Bacanora's main asset and considered a potentially world-class lithium deposit.
A pre-feasibility study in March indicated a net present value of US$776mln, while a more detailed bankable study is expected to be finished in the first quarter of next year.
Earlier this week, Bacanora’s plan to switch domicile to the UK was voted down by shareholders, with REM’s decision to vote against the move a key reason it failed.
Bacanora said it still considers the switch would be in the best interests of the company.
James Leahy, chairman, said: “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.
“In our view, as well as undervaluing the Company, the Proposed Offer has the potential to impede the project’s development going forward.”
Rare Earth seem to be caught on the hop a little by Bacanora’s decision to make its approach public knowledge and only confirmed its move on Friday afternoon though a holding statement.
“The Directors of Rare Earth Minerals note the announcement from Bacanora Minerals Limited ("Bacanora") today and confirm that the Company has approached Bacanora with a merger proposal.”
As well as its stake in Bacanora, Rare Earth now owns a 18% stake in European Metals, the owner of the huge Cinovec deposit in the Czech Republic and just a little distance away from the plants of the giant European car makers.
It has also a 15.5% stake in Canada-listed MacArthur Minerals (CVE:MMS), which has number lithium exploration licences in Australia.
--update for REM statement--