Chariot fights back
miningweekly.com
By: Liezel Hill
21st August 2009
TORONTO (miningweekly.com) - Canadian junior Chariot Resources came out swinging on Friday morning, in its response to a dissidents' proxy circular filed a day earlier by high-profile mining entrepreneur Lukas Lundin, seeking to oust the current board and replace it with a new slate of nominees, including himself.
Lundin and fellow "concerned shareholder" - and Lundin Mining director - Brian Edgar believe the current board of Chariot has not done enough to progress the company's flagship Mina Justa (or Marcona) copper project, in Peru, and that the board is responsible for a "consistent undervaluation" of the company by the market.
Chariot's stock has only increased 8% over the last five years, while the copper price has more than doubled and Chariot's peer group has increased by 127%, the dissidents said.
However, in a statement issued early on Friday, Chariot's board of directors points out that the company's stock has actually increased 83% since the firm bought the Mina Justa project in 2005, while, "during the same period, Lundin Mining's share price has increased by just 13%".
The Mina Justa project, in which Chariot owns 70% and the rest is held by Korea Resources Corporation (owned by the Korean government) and LS-Nikko Copper, is slated by the company as one of the world's premier early-stage copper projects.
In announcing its intentions, the dissident group listed a series of actions it would take if its slate of nominees are elected, including "assembling a world class technical team to review the current fasibility study...development of a technical plan with a timeline to advance the Marcona Copper project to bankable feasibility study stage as soon as possible", and strengthening relations with local Peruvian stakeholders.
However, the Chariot directors dismiss the plan as "so vague that it is meaningless", and add that the actions promised by the Lundin directors "have already been undertaken by Chariot".
As far as bankability goes, the company says that although the project debt market has been closed to projects like Mina Justa since the fourth quarter of 2008, Chariot has been working with its Korean partners on an updated financing plan, "which may include one or more of the lenders who had previously been parties to a term sheet relating to a $325-million project finance facility".
Lundin Mining, chaired by Lukas Lundin, owns 18,3% of Chariot, after acquiring a stake in the company when it bought Rio Narcea, in 2007.
However, the slate of director nominees proposed by the dissidents only actually own or control themselves about 0,75% of the company, the current directors said.
"During this last 12 months, which has been a challenging period for all junior mining companies, particularly development companies, Chariot's shares have performed as well as or better than its development company peers, while Lundin Mining's shares have performed worse than its peers," they said.
"Chariot's board of directors believes that the action of the Lundin directors is an opportunistic attempt to steal control of your company through control of the board without paying a control premium to you for your shares."
Although Chariot's board of directors would like to see the company sold for a decent premium to a buyer with the resources to develop the large Mina Justa project, current market conditions mean that shareholders are better off keeping the firm independent for now, the directors said.
"It would be in the best interests of Chariot and its shareholders to maintain Chariot's independence and launch a formal sales process when the confidence of potential acquirors in economic recovery, and their access to financing, improve, and that there are opportunities to optimise the auction value of Chariot in the near term."
However, if the Lundin-affiliated nominees were appointed to the board, this would effectively deter any potential third party offer and "materially prejudice" Chariot shareholders' ability to receive the best available premium for their shares, the current board said.
Further, although the Lundin statement seeks to paint Chariot's management and board as incompetent, the directors point out that the current board has over 175 years of collective experience in the mining industry and over 85 years of direct experience in South and Central America, including in Peru.
Chariot filed a feasibility study for its 70%-owned Mina Justa project in June this year.
Over an 11,5-year operating life, the mine is expected to produce 1,06-billion pounds of copper in cathodes, by vat leaching, plus about 1,64 million tons of concentrates containing 1,32-billion pounds of payable copper, 16-million ounces of payable silver and a minor amount of payable gold, from the concentrator.
Average annual production is forecast at 244,5-million pounds of copper a year.
The company is scheduled to hold its annual shareholders meeting on September 4.
Chariot shares rose 12,5% on Thursday, but were down 10,1% on Friday afternoon, at 44,5 Canadian cents, by 14:07 in Toronto. |
