It was the takeover that was too good to be true. Investors hoping for a golden Christmas will be sorely disappointed at news that Central Rand Gold (CRND:AIM) has scrappedall takeover talks. The news prompts a 24% collapse in the share price to 2.75p, a far cry from the 54p indicative bid price.
The South African miner had been in takeover talks with four different Asian investors who had proposed to pay approximately $150 million for its operating subsidiary.
The market always suspected there was a catch to the takeover interest as the highest the share price ever reached was 24.3p in November 2014 - less than half the implied acquisition price.
Talks dragged on and on; and the miner had to raise more money for working capital while it undertook a lengthy process to upgrade its operations.
Two suitors pulled out in June. Three months later, the miner said discussions with the remaining suitors had taken a slight turn.
It said Hiria and its financial partner Hangzhou Everbright Private Equity Investment Management were now looking at making an investment in the business rather than buying the operating subsidiary.
Central Rand Gold also said progress with the other suitor, Huili, had ‘slowed’ since late summer.
It now claims market conditions haven’t been right to secure an unconditional offer from any of the interested parties.
‘The gold price has fallen in recent times along with a wide spread sell off in junior gold miners, which has resulted in companies across the sector reducing capital expenditure and delaying investment decisions pending an improvement in underlying market conditions,’ says the company in a statement.
The miner has terminated the sales process but adds that it will stay in touch with the suitors in case they still want to buy the business.
It represents yet another setback in the company’s history on the UK stock market. The company’s original plan to use mechanised mining did not work. It then suffered metallurgical challenges. The plant coped well with soft clay material but could not handle the hard rock from Central Rand’s underground mining.
Production was also disrupted by acid water affecting the Witwatersrand Central Basin which includes Central Rand’s mine. The water has been slowly declining and the miner has found new sources of near surface gold-rich material and opencast opportunities.
Sadly the takeover setback has cost Johan de Toit his job as chief executive. He will leave at the end of 2015 and will be replaced on an interim basis by non-executive director Allen Phillips.
There are other personnel changes. Mark Austin, the geologist behind Goldplat’s (GDP:AIM) ill-fated attempt to become a multi-asset mining company, will join the board as non-executive director. Former Norilsk Nickel number cruncher Lola Trollip becomes chief financial officer.
House broker Panmure Gordon has suspended its stock recommendation pending a reappraisal of its financial forecasts.
