ArticleFrom today's National Post:
IVERNIA NOW IN PLAY
When presented at the Prospectors and Developers Association of Canada conference a few weeks ago, the talk was appropriately titled: “What to do when it all goes wrong.”
Now a rival Bermuda-based company called Griffin Mining
is taking advantage of Toronto-based Ivernia’s myriad environmental and financial problems to try and snatch it up at a bargain-basement price of just $27-million.
“We are familiar with the issues, we are familiar with how their project was originally planned, and so we are prepared to take this on,” Griffin finance director Roger Goodwin said in an interview.
Ivernia is among the world’s only pure-play lead producers and controls the lucrative Magellan mine in Western Australia. The company was rolling along until early 2007, when it was caught up in one of the mining industry’s worst environmental messes in recent memory.
In March of that year, thousands of birds around the Magellan mine were found dead because of lead poisoning. High levels of the toxic metal were also found in the blood of a few local people. A local uproar resulted, and Ivernia was forced to halt shipments of lead concentrate from the nearby port of Esperance, and shut the mine.
After nearly two years of consultations, Ivernia won approval for a new plan earlier this year, in which it would ship the concentrate out of a different port using state-ofthe-art steel containers that make contamination almost impossible.
Those shipments are expected to begin very soon. Yet in the meantime, Ivernia’s financial situation has deteriorated, leaving it vulnerable to Griffin’s hostile takeover.
Griffin’s all-cash bid is worth 15¢ a share. While that is above Ivernia’s recent trading range (it bottomed out at 4¢ in November) the stock was worth more than $2 a couple of years ago.
Last week, t he cash strapped company reached a deal (subject to Toronto Stock Exchange approval) to extend its debt maturity by four years, but lower the conversion price from US$1.08 a share to US11¢. The company noted that is in “serious financial difficulty.”
Mr. Goodwin said this announcement is evidence that Griffin’s offer for Ivernia is fair and should not be significantly higher.
“Having seen the board value this company at US11¢, for us to come in way on top of that calls into question whether we’re disadvantaging our own shareholders and paying too much for it,” he said.
He also said that Griffin is equipped to deal with the lingering environmental concerns around the project, saying it “may take some investment on our part” to ensure there are no problems going forward.
One possibility he raised is building a smelter that would convert the lead concentrate into lead bullion, an idea that was considered before. “Bullion would be a lot more secure and a lot safer to ship,” he said.
There is plenty of doubt about whether shareholders will accept this bid. Kerry Smith, an analyst at Haywood Securities, noted that Sentient Group, Ivernia’s biggest shareholder, would likely prefer an all-stock bid that gives them ongoing exposure to the project.
“Ivernia is now in play, but a higher bid will be required to encourage shareholders to tender,” he wrote in a note to clients.