Chalco intends to make a takeover offer for the 60% interest in the Mongolian producer for $8.48 per share, up from SouthGobi’s last closing price of $6.62 prior to the offer.
SouthGobi said it was informed by its 57.6%-shareholder Ivanhoe Mines that Ivanhoe had agreed to accept the offer under a signed lock-up agreement with Chalco.
SouthGobi’s board of directors created a special committee comprising independent directors including Pierre Lebel, Gordon Lancaster, Andre Deepwell and Robert Hanson to consider the proportional offer.
The special committee called on Blake, Cassels & Graydon LLP as its independent legal counsel and would engage an independent financial advisor to assist with the possible takeover.
In addition to the proportional offer, Chalco will have the rights to purchase all of SouthGobi’s coal.
Chalco will have the obligation to purchase the coal at market prices over the next 24 months.
It will also help SouthGobi acquire electricity for its Mongolian business operations either through a direct connection to grid power, or through development of a conveniently located power plant.
SouthGobi has a dual-listing on the Hong Kong Stock Exchange and the Shanghai Stock Exchange and focuses on exploration and development of metallurgical and thermal coal deposits in Mongolia’s South Gobi region.
Its flagship mine is Ovoot Tolgoi which began production in 2009 and sells coal to customers in China.
Chalco will mail the takeover bid in connection with the proportional offer on July 5, 2012.