Khan agrees CNNC bid but ARMZ holds out

02 February 2010

Canada-based Khan Resources has chosen a takeover bid from Chinese company CNNC Overseas Uranium Holding Ltd (CNNC) over a rival offer from Russia's AtomRedMetzoloto (ARMZ). In response, ARMZ is extending its offer.

Less than a week after Khan signed a memorandum of understanding to finalise legal wrangling over mining rights to its Dornod uranium project in Mongolia, the company has announced that it has entered into a definitive agreement to sell all of its outstanding shares to CNNC for C$0.96 per share. According to Khan, CNNC's offer represents a premium of 118% on the closing share price prior to an unsolicited takeover bid put forward by ARMZ in November, and a 48% premium to the C$0.65 subsequently offered by ARMZ.

The CNNC bid was described by Khan president and CEO Martin Quick as "far superior" to the ARMZ offer which Khan urged its shareholders to reject in November. The company is now recommending that shareholders accept CNNC's takeover bid, which the company's financial adviser has described as "fair, from a financial point of view", and that comes with fewer conditions attached to it than ARMZ's bid. "CNNC brings a lot to the table, with its deep expertise in nuclear energy, financial strength and strong political ties with Mongolia," Quick said.

Beijing-based CNNC Overseas Uranium Holding Ltd is an indirect wholly owned subsidiary of the China National Nuclear Corporation, confusingly also referred to as CNNC. Another CNNC subsidiary, Hong Kong-based CNNC International, already has interests in another Mongolian uranium project, Gurvanbulag, since buying out Canadian company Western Prospector in a deal that was finalised in August 2009.

ARMZ: no surrender

Meanwhile, ARMZ has said it is extending its offer for Khan, which had been due to expire on 1 February, until 1 March so that it can "properly consider its alternatives in response to the CNNC offer". The Russian company is also querying the legality of the memorandum of understanding (MoU) on Dornod licensing and ownership signed by Khan and Mongolian state uranium company MonAtom.

ARMZ has pointed to a press release issued by the Mongolian Nuclear Energy Agency alleging that some of the clauses of last week's MoU violate Mongolian state policies on radioactive mineral resources and nuclear energy, as well as some provisions of Mongolia's nuclear energy law. According to ARMZ, this means that the MoU, which would have allowed for the re-registration and approval of exploration and mining licences for Dornod held by Khan joint venture Central Asian Uranium Company (CAUC) and Khan Mongolia, might not be legally able to proceed.

In a press release, ARMZ goes on to say that it believes the MoU also violates the Mongolian government's obligations under a Mongolian-Russian intergovernmental treaty of August 2009, which made provision for the creation of a Russian-Mongolian joint venture to develop Dornod.

In its press release, ARMZ reiterated its commitment to "strictly comply with the legal obligations of the government of Russia under the Inter-Governmental Treaty and to pursue the development of the Mongolian uranium sector in cooperation with Mongolia and in accordance with applicable international treaties and Mongolian laws."


Researched and written

by World Nuclear News