Takeover by AXMIN/Addax & Oryx

18th Mar '10 by marben100

4 comments 4931 reads

AfNat, which holds 13.3m shares in Niger Uranium Ltd and is chaired by David Weill, has today announced an all share takeover deal by TSX-V listed gold explorer AXMIN (AXM, http://www.axmininc.com/DesktopDefault.aspx?tabid=1 ).

By my reckoning, the deal values AfNat at around £9m (2.4p/share) using AXMIN's last traded price and looks like a decent offer relative to AfNat's current market price below 2p - though not quite so good against tangible assets that I calculate at over £10m (2.5p/share), comprising cash of £6.1m, following the recent Niger Uranium Ltd divvy and other transactions, shares in URU and a recent investment in private company CDC.

What intrigues me about this is that around 50% of AXMIN is owned by the privately held Addax & Oryx Group .

Addax Petroleum was previously spun out of Addax & Oryx and sold last year to Sinopec.

All I know about the management of Addax & Oryx is that it is chaired by Jean Claude Gandur (who also chairs AXMIN).

I'm wondering if anyone else here knows anymore about this "mysterious" group and its management?

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Asset

Value (£m)

Cash

6.3

Kalahari shares

2.1

CDC Investment

1.7

URU shares

0.3

TOTAL

10.4

marben100

18th Mar '10

Looking at recent newsflow from AXMIN, looks like they have some quite interesting projects but are very strapped for cash. Following this deal, AfNat shareholders will own ~40% of AXMIN. I wonder whether any AfNat directors will be joining AXMIN's Board? This should become clealer when AfNat issues its detailed circular.

Cheers,

Mark

16th Apr '10

Todays' news re CDC is a very interesting development for AfNat. Coupled with recent confirmation of the deal with AXMIN, it was sufficient to persuade me to take a small position - which may get larger as more details emerge.

21st Apr '10

...and today's announcement by Niger Uranium Ltd (LON:URU) is also rather beneficial. Assuming the proposed special dividend is approved, AfNat will acquire 1.2m Kalahari Minerals (LON:KAH) shares, in addition to its 13.3m URU shares. Assuming that ex- the special dividend URU trades at a measly 2p, that takes AfNat's tangible assets to 2.5p/share, by my reckoning.

This breaks down as follows:

Asset	Value (£m)

Cash	6.3
Kalahari shares	2.1
CDC Investment	1.7
URU shares	0.3

TOTAL	10.4

Kalahari & URU shares are valued at current market prices & exchange rates. CDC is at cost. Note that there is substantial possible upside to the value of the CDC holding, which AfNat has a controlling stake in, if/when it IPOs as per previous posts.

AXMIN's SP has risen since the original announcement of the takeover and, if it is maintained, would be equivalent to 3.3p per AfNat share.

Cheers,

Mark

4th May '10

AfNat has today issued details of the scheme of arrangement under which the takeover would take place. I have skimmed it and noted the following key points:

AfNat shareholders will receive 0.4803 AXMIN shares per AfNat share
AfNat owns 7,857,142 ordinary shares of CDC (expected to float on 7th May). These were acquired us US$0.35 each. CDC is hoping to do a pre-IPO placing at US$0.50 per CDC share. Would appreciate it if anyone has any news on the progress of this and CDC's float.
(p43, s6.8): "The principal business of the Enlarged Group will be the exploration, development and operation of the Passendro Gold Project in CAR and the management of the portfolio of Investment Securities."

The following details are important for AfNat shareholders:

(p49, s14.4):

Where AfNat Shareholders hold Depositary Interests (i.e. in CREST), any New AXMIN Shares to which an AfNat Shareholder is entitled will be issued to such AfNat Shareholder in certificated form. New AXMIN Share certificates will be despatched in certificated form (i.e. not in CREST) as soon as possible after the Effective Date, and in any event no later than 14 days thereafter, to the address appearing in the register of members or Depositary Interest holders of AfNat as at the Effective Date or, in the case of joint holders, to the holder whose name stands first in such register in respect of the joint holding concerned or in accordance with any special instructions regarding communications. All documents sent through the post will be sent at the risk of the person(s) entitled thereto.

Per p7, the last day of dealings on AIM will be 10th June and AXMIN certificates will be dispatched by 25th June at the latest. So, it may not be possible for AfNat shareholders that hold for the conversion to trade for a period of two weeks or more after 10th June. Nominee holdings would normally be held in CREST too, AFAIK.

Certificated holdings may be a bit of a pain for UK brokers to deal in Canada... it could actually be considerably longer than 2 weeks before it is possible to deal again. I shall speak to my broker tomorrow.

Concerning taxation (p84):

UK taxation of chargeable gains

(a) In the event that the Scheme becomes effective in accordance with its terms, to the extent that AXMIN Shares are issued as consideration to AfNat Shareholders, there will be no disposal for the purpose of United Kingdom taxation on chargeable gains and the AfNat Shares and the New AXMIN Shares should be treated as the same asset for taxation purposes.

Investors should heed this warning:

The exploration and development of natural resources and investing in companies pursuing such activities, are speculative activities that involve a high degree of financial risk.

Considering the political risk of trying to build a mine in the CAR and the amount of finance that would need to be raised to proceed, this investment is certainly highly speculative. What makes it interesting (besides potentially attractive project economics) are the excellent connections, financial, political and technical, of the principals involved here: J.C Gandur & Mike Beck. [Mike Beck's interest is via Angstrom Capital].

...and this is an interesting (but unsurprising) detail:

p69 s5.10:

Under an engagement letter dated 18 March 2010 AfNat engaged Chiliogon Partners LLP (“Chiliogon”) to act as AfNat’s joint financial adviser in relation to the Proposal. Under the agreement AfNat has agreed to pay Chiliogon a success fee of US$200,000 immediately prior to implementation of the Scheme.

David de Jongh Weill and Ozge Erdem, directors of AfNat, are also Partners at Chiliogon Partners LLP. George Roach and Michael Humphries approved the terms of the Chiliogon engagement letter, and the scope of services to be provided by Chiliogon, with Mr.Weill and Ms. Erdem abstaining from the resolution to approve the terms. Although Chiliogon Partners LLP is classed as a “related party”, the terms of the engagement letter did not constitute a related party transaction under the AIM Rules.

DISCLOSURE: I hold AfNat

Regards,

Takeover by AXMIN/Addax & Oryx

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Marben100

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