Gujarat offered one of its shares for every five Rey shares two weeks ago, valuing Rey at 9c per share at the time, which was a considerable premium to the 5c territory it occupied for most of last month.

Rey directors have since called for its shareholders to not act on any correspondence from Gujarat while launching a rights issue to raise $A2.75 million.

Proceeds are intended to further advance Rey’s wholly owned Duchess-Paradise project in Western Australia’s Canning Basin, which has an indicated resource of 144 million tonnes of thermal coal and total resources of 511Mt.

“We are concerned that the Rey directors have advised their shareholders to reject Gujarat’s offer prior to receipt of our bidder’s statement,” Gujarat said, before updating the offer’s value.

“Rey directors are rejecting Gujarat’s offer at the implied rate of 11c per Rey share stating it undervalues Rey, but at the same time are proposing a rights issue at 9c based on the current share price, which is supported by the existence of Gujarat’s offer.”

Gujarat voiced its views on how far the $2.75 million might go.

“We believe that the proposed amount of raising is not sufficient to complete the proposed prefeasibility study and a material amount will be absorbed in undertaking the rights issue and defending Gujarat’s bid.

“Gujarat has strong cash flow and profitability and its proven ability to finance and manage the development of large coal assets is considered a key benefit to the shareholders of Rey.”

Gujarat also noted that Rey’s share price was 6.4c before the takeover offer hit the market and the volume weighted average price was 5.5c in the 30 days previous.

Rey’s one-for-five non-renounceable rights issue is for 30.61 million shares.

On the day of the takeover offer, Gujarat chairman Arun Jagatramka resigned from his position as a Rey director.

Rey also holds several prospective copper and gold exploration projects in Chile and Peru.

Both Gujarat and Rey shares remained unchanged at 55c and 8.8c respectively.