More on WSPMonday July 17, 6:20 pm Eastern Time
Winspear board rejects offer by De Beers
(UPDATE: Adds De Beers reaction in para 6, more details throughout, updates stock prices, figures in U.S. dollars unless noted)
By Lesley Wroughton
TORONTO, July 17 (Reuters) - Winspear Diamonds (Toronto:WSP.TO - news), a little known, small-cap Canadian miner, rejected outright a C$259 million ($175 million) hostile bid by the world's dominant diamond firm, De Beers , on Monday, saying the price was too low.
Winspear said the bid of C$4.25 a share did not reflect the huge potential of its Snap Lake diamond project in Canada's north -- the target of De Beers' rare hostile move and the key for it to break into Canada's emerging diamond industry.
Randy Turner, Winspear president and chief executive, said on Monday the company's board of directors unanimously decided the offer by the South African firm was ``unacceptable''.
``I want to assure shareholders that the board and management are absolutely focused on delivering superior value and we encourage them to reject the offer,'' Turner said in a statement.
``We have no further comment,'' said Tom Beardmore-Gray, De Beers senior vice-president in Canada, in reaction to Winspear board's rejection of the offer.
De Beers, which mailed its offer on July 6 has given Winspear shareholders until July 28 to consider the bid.
But Turner said Winspear's board believes the offer hugely undervalues the company and particularly Snap Lake, possibly one of the wealthiest undeveloped diamond properties in the world. It is located on Camsell Lake, 220 kilometres (135 miles) northeast of Yellowknife, capital of the Northwest Territories.
``Moreover, the offer does not take into account the property's full exploration potential,'' Turner added.
He said although the full extent of Snap Lake's riches was not fully known, Winspear's financial advisors, BMO Nesbitt Burns Inc. and Canaccord Capital Corp, advised the board that the offer is financially inadequate.
Last week, in an attempt to prove to shareholders the project's potential, Winspear released results of a scoping study, which increased key minable tonnage data to 39.5 million tonnes at 1.70 carats per tonne, compared with an earlier 12.6 million tonnes at 1.75 carats per tonne. Snap Lake diamonds are valued at $118 per carat.
Turner said on Monday that Winspear had been approached by other companies interested in discussing alternative offers. The Vancouver company opened its files to third parties in the hope of driving off De Beers.
De Beers has been unmoved by Winspear's earlier protests, saying it believes the offer to be ``fair and reasonable''. It has a Web site devoted to its Winspear offer.
The Snap Lake project would give De Beers its first major producing asset outside Africa and its most significant asset in Canada.
It has said the recent increase in the value of Winspear's shares was solely as a result of its offer, representing a 90 percent premium over the average 20-day closing price before the offer was made.
But Winspear said on Monday the price of its common shares, immediately prior to the offer, was depressed primarily because of the weak state of equity markets across the mining sector and that the offer capitalised on this.
Winspear has accused the diamond giant from the start of being opportunistic, saying its offer was carefully timed to be made just as the value of Snap Lake was becoming fully understood.
Turner said the offer has nine conditions, any of which, if not satisfied or waived, would allow De Beers to terminate the offer at its discretion.
He said the offer arbitrarily excludes Winspear's U.S. shareholders, which is not a ``permitted bid'' under Winspear's shareholder rights plan, and is coercive because it is open for the shortest time allowed by law.
Winspear shares closed at C$4.51 in Toronto on Monday. De Beers closed up 0.01 percent at 185.60 rand on the Johannesburg Stock Exchange.
($1 equals $1.48 Canadian)