Transcription of Finance News Network Interview with Sundance Resources Limited (ASX:SDL) Managing Director and CEO, Giulio CaselloLelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me today at the Africa Down Under Conference in Perth from Sundance Resources Limited
(ASX:SDL) is Managing Director and CEO, Giulio Casello. Giulio, great to speak with you again.
Giulio Casello: Thank you.
Lelde Smits: Sundance has just accepted a revised takeover bid from your largest shareholder, China’s Hanlong Mining. What were the Board’s most compelling arguments for backing the bid?
Giulio Casello: Well maybe let me just give you a little bit of background on the bid; you know Hanlong initially put in the bid last year at 57 cents. And along the way, there’ve been a few key conditions that we’ve had to meet as we’ve gone along and we’ve had a pretty successful 12 months in getting those done. And then one of the last conditions we had as we moved forward, was to get the Chinese Government NDRC (National Development and Reform Commission) provisional approval. And we achieved that at the end of July and there were a few conditions that came with that, and a couple of them were really no issues for us. The convention in Cameroon and the mining permit in Congo, which were part of our SIA (Scheme Implementation Agreement), but one of them was to have a reasonable price on the Hanlong takeover of Sundance.
So we’ve spent – I suppose had a very good look at that, understanding what that means from a China perspective. Now China has had a number of deals, you know, that have been difficult in the past and you could say, haven’t gone very well for them. And since the bid was first put in a year ago, when you look at iron ore comparable companies, now they’ve all dropped in share price between 30 and 50 per cent. Iron ore price has dropped 20 per cent.
And even though the Board, you know, recognises that our project in value hasn’t dropped, and in fact it’s probably enhanced because it’s a long term project based on long term iron ore, we had to look at the reality of where the market was, the ability to get funding and the desire for China to work through what is called a reasonable price. So we worked very hard with Hanlong over an extended period of time and we believe we currently now have, subject to a superior offer coming along, the very best deal we could for our shareholders.
Lelde Smits: Now as you mentioned a superior offer, what is your response to speculation that a counter bid could be circling?
Giulio Casello: Well one of the conditions when we negotiated the price is we’ll remove exclusivity in our Scheme Implementation Agreement, and any penalty fees that were associated with the exclusivity. But basically now it’s up to other people. You know, the information is there, we were talking to a large number of people before we went into the exclusivity period with the Scheme. It’s really going to be up to them and see what they do.
Lelde Smits: Now Giulio looking closer at the bid, what approvals are required to complete it?
Giulio Casello: OK, well we’ve got a couple of key items coming up. We’re looking at getting to a shareholder vote and at the end of November for a Scheme closure in December 2012. Before it gets to a shareholder vote, there’s a first court hearing and in that first court hearing which allows the shareholders to vote we have to demonstrate, or Hanlong has to demonstrate, that there’s ability to succeed in funding the takeover bid.
So that financial commitment from CDB (China Development Bank) is critical to match the first court hearing. And then obviously having the credit approved term sheet, which is saying the money is ready to go before the shareholder vote which is late November, is critical. And tied up with that is the conditions we’ve always had, which is completing the convention in Cameroon and the mining permit in Congo. And all those are going well on schedule and we expect that we’ll meet those timelines.
Lelde Smits: And Giulio, what amendments does the Scheme Implementation Agreement include to ensure that Hanlong fulfils its obligations or doesn’t lower the bid further?
Giulio Casello: Well one of the items that was negotiated in the deal was what we call a break fee. So there are a number of - from material breaches there’s always been a break fee, but we introduced a new break fee which said that if there was an attempt to lower price, there would be a fee payable from Hanlong to Sundance. I think it’s around $14 million and it has now got a parent guarantee back through the parent company in China. So that we thought was important - not just in having the visual support and you know, the warranty that these prices are exactly what’s required to get the approvals. But also to have it backed up by some sort of cash, we thought was important.
Lelde Smits: So Giulio if the takeover does go ahead, when would you expect it to be finalised?
Giulio Casello: Well as I mentioned before, the Scheme meeting for people to allow the vote should be the end of November and we expect the Scheme to be completed around December 19, 2012.
Lelde Smits: Now to your flagship Mbalam iron ore project in West Africa, what are the latest developments?
Giulio Casello: Well we’ve had a – it’s been an exciting year in the project and obviously stretching from resource upgrades, our high grade hematite resources we increased from 500 odd tonnes to 775 million tonnes during the year. We’ve also released a new resource for itabirite in the Nabeba part of it down in Congo, so we always had about 2.3 billion tonnes which we had in the Cameroon site. We released resources for another 1.4 billion tonnes. So really locking in this is a high grade, long term, very profitable project.
So that was a great achievement and obviously getting the key terms agreed with the Cameroon Government on the convention where we locked in place taxes, equity positions, life of mine positions. If it was something that was very important - we finished those this year as well. And in Congo, even though we’re waiting for the mining permit at the moment, we’ve gained the full support from the Ministry of Mines in Congo and they’ve published a letter where they’re pushing this through the Ministry. And in fact, we’ve just been meeting again with them recently and hopefully in the next couple of months, we’ll have the mining permit in Congo.
Lelde Smits: So Giulio, when do you expect to announce maiden production?
Giulio Casello: Well what we’ve done, what we’ve really focused on, particularly with our pre-engineering and our engineering works is a three year construction period. So the Hanlong bid will complete with Sundance, there’ll be some period to get the financing for the project and then once the financing is achieved, then it’s really three years for us to build this project. And so that’s sort of approximately the time frame.
Lelde Smits: And finally Giulio, how do you anticipate a full takeover by Hanlong Mining would facilitate the development of the Mbalam project?
Giulio Casello: There’s no doubt having a partner that is either backed financially or backed by China, has been really important to us in getting the support of the governments in Cameroon and Congo. They’re seeing a clear path now about how it can be built and it’s been very important to get this project built and get the confidence in our ability to get it done from both Cameroon and Congo.
Lelde Smits: Giulio Casello, thanks for the update on Sundance Resources.
Giulio Casello: My pleasure, thank you very much.
Ends
