A small resources company, which owns one of Australia’s biggest deposits of phosphate, is encouraging its shareholders to vote in favour of a $40.5 million takeover bid by a foreign-owned private equity group.
Verdant Minerals, which owns the Ammaroo Phosphate project 200 kilometres south-east of Tennant Creek, said the offer by the London-based CD Capital Natural Resources Fund (CD Capital), represented a 113 per cent premium to the company’s current share price and would “significantly increase the probability” of its Ammaroo project becoming a reality.
The takeover announcement on Monday initially saw Verdant’s modest share price double, before settling at 3 cents a share. The offer from CD Capital would see Verdant shareholders get 3.2 cents a share.
Verdant Minerals managing director Chris Tziolis said, if the takeover was successful, CD Capital would end up with about 66 per cent of the company, with Washington H. Soul Pattinson and Company Limited keeping its share of 33 per cent.
He said shareholders would hopefully seize the opportunity.
“It’s a large premium to what the shares have been trading at for the past couple of years,” he said.
“With our share price and market capitalisation as it was and is now, the ability to raise that capital is quite constrained, so that’s the advantage that the takeover gives to a project perspective.”
Not all shareholders convinced
A number of shareholders and people close to the Ammaroo project have told ABC Rural the takeover bid made little sense.
“Two years ago I attended a food seminar interstate where it was pointed out that we have less than 20 years of phosphate reserves left,” wrote one shareholder.
“Then we may have to import [phosphate] from Algeria, with all the political uncertainty that involves.
In another email to ABC Rural, David wrote:
“In my opinion it will be a steal and a kick in the guts for shareholders who anticipated long-term value in the company based on its recent announcements,” he said.
“$40 million is nowhere near enough for a company holding the rights to a billion-tonne phosphate resource at Ammaroo.”
Market analyst Mark Olivetta said the smaller Verdant shareholders would probably not have much say in the takeover.
“Unfortunately with takeover offers like this, if the majority of the shares are all for the takeover, the little guy has to go with the flow,” he said.
“If there’s enough shareholders that voice their discontentment with the offer, then another offer gets placed on the table … so potentially it is not all done and dusted.”
NAIF loan still on the table
Last year the Ammaroo project attracted the attention of the Federal Government’s Northern Australia Infrastructure Facility (NAIF), which provided Verdant Minerals with a pathway towards receiving a long-term concessional loan of up to $160 million.
In a statement to ABC Rural, a spokesperson for NAIF said they “believed the Amaroo Phosphate Project had the potential to provide substantial benefits to Northern Australia and the Northern Territory”.
“We are aware of a recent announcement regarding corporate activity with regard to Verdant Minerals,” they said.
“NAIF will continue to work with Verdant Minerals over the coming months as the company looks to meet the conditions in the indicative term sheet in order to move towards a final investment decision on financial assistance from NAIF.”
Verdant Minerals’ Chris Tziolis, has previously told ABC Rural the Northern Territory is sitting on a “multi-billion dollar fertiliser industry” that could help grow Australia’s agriculture sector and the NT could become the “Pilbara of Phosphate”.