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Chinese cut Sundance offer by 21%

Aerial view of Sundance’s
Mbalam iron ore project
which straddles the
Congo-Cameroon border
Perth, Australia — 16 August 2012 – The Sichuan Hanlong Group “’ a major Chinese investor in highway and power projects “’ has cut its takeover bid for the rest of Australian-based international iron ore company Sundance Resources Limited by 21%.

Quoting “a person with knowledge on the matter,” Bloomberg News reports that Hanlong, which won conditional approval for the bid this month, offered 45 Australian cents a share. The new offer from Hanlong, which owns about 17% of Sundance and had bid 57 cents a share in October, values the iron ore developer at A$1.4 billion (US$1.5 billion).

The truncated bid comes in the wake of a 34% decline in iron ore prices since Hanlong’s first offer on 4 October, and is still more than a third above Sundance’s closing price yesterday. Slowing demand in Europe and China, the biggest metals consumer, is weighing on commodity prices, prompting companies to assess spending plans on new mines and takeovers.

“Somewhere in the forties will probably be acceptable,” Hayden Bairstow, resources analyst at CLSA Asia-Pacific Markets, said by phone. “It’s an unfunded development play; without the bid, they can’t afford to do it.”

Buying Sundance will give Hanlong, which aims to invest as much as A$5 billion in resource assets, control of the US$4.7 billion Mbalam rail, port and mine project straddling the border of Cameroon and Republic of Congo.

Sundance, which fell 26% since 4 October, dropped 2.9% to 33.5 Australian cents at the close yesterday in Sydney.

The drop in iron ore prices has been a key driver in Hanlong lowering its bid, Bairstow said. The company was considering reducing its offer to about 50 cents earlier this month, people with knowledge of the matter said on 2 August.

“Negotiations with Hanlong are incomplete,” Sundance said in an e-mailed response to questions about the 45-cent-a-share bid. “While discussions are ongoing, Sundance isn’t commenting.” Sundance and Hanlong are in talks about a “reasonable acquisition price,” Perth-based Sundance said in a 2 August statement. The approval from China’s National Development and Reform Commission is conditional on the price, on Hanlong securing debt funding and mining development rights, Sundance said.

BHP Billiton Ltd. (BHP), the world’s biggest mining company, this month said it was reviewing its development pipeline of major projects as prices fall. Hanlong made an initial offer in July last year, increasing its bid by 14% in October after Sundance had rejected the first bid as too low.

Source: Bloomberg News. For more information, click here.