Sierra Rutile (ASX:SRX) has urged its shareholders for a second time to reject a takeover offer from PRM Services LLC, stating that the offer has been made ‘opportunistically’ and does not reflect Sierra Rutile’s strategic value.
PRM Services is an investment firm owned by Craig Dean, CEO of US-based global metals trading company Gerald Group.
The company made its initial takeover offer on March 20, seeking to acquire remaining shares in Sierra Rutile at A$0.095 per share.
Sierra Rutile responded immediately, telling shareholders to ‘take no action’, and have now offered a preliminary view from directors, adding that a more formal Target Statement would be published prior to the final date for the offer, which is May 5, 2024 at 4pm.
According to this preliminary view, the bid is opportunistic, and based on Sierra Rutile’s weak performance on the Australian stock exchange – where shares have been down 66 percent year-on-year – which itself is the result of a downturn in the mineral sands market, together uncertainty at Sierra Rutile’s Area 1 operation in Sierra Leone.
Operations have been suspended at Area 1, where Sierra Rutile is seeking to convert mineral resources to ore reserves with a view to extending the life of mine plan.
The company is also in discussion with the Sierra Leone government about remaining production from Area 1, and how this may be influenced by the current fiscal regime.
Adding to the claim of opportunism was Sierra Rutile’s observation that its one-month volume-weighted average price (VWAP) was $0.075 per share on the eve of PRM’s takeover bid, noting that this was significantly lower than the 12-month VWAP of A$0.154 per share and 12-month high of A$0.300 per share.
Chairman Greg Martin said the bid had missed Sierra Rutile’s strategic potential.
“We have formed the view that the offer is opportunistic, inadequate and undervalues the company, following the Board’s preliminary review of the unsolicited on-market takeover offer from PRM,” he said.
“PRM has opportunistically timed its offer ahead of key value catalysts, such as the Sembehun DFS (definitive feasibility study, and we do not believe it reflects Sierra Rutile’s significant strategic value as a major participant in the global mineral sands industry.
“However, the Board will continue to assess the on-market takeover further and issue an official Target’s Statement containing a formal recommendation from Sierra Rutile’s Directors in relation to the Offer.”
The Sembehun DFS is set for completion in mid-April 2024.
Sierra Rutile is trading at 12c.