Shares digital

Goodwin puts brave face on prospect of losing out on Yukon Zinc

by Dan Coatsworth

Aim-quoted metals producer Griffin Mining says it will not fight an agreed counter offer for Canadian exploration group Yukon Zinc but insists its all-share offer is not a ‘dead deal’.

A rival offer, made up of £49.9 million (C$100 million) cash, by Chinese consortium of molybdenum giant Jinduicheng and mining bureau Northwest, has been accepted by Yukon’s board. Griffin’s one for nine share offer is currently valued at £42 million.

Finance director Roger Goodwin says Griffin will not improve its terms but will remain in the bid situation until Yukon shareholders have voted on the takeover offers.‘The other party have come in with cash, which we don’t want to do,’ says Goodwin. ‘Our plan is to use our existing [$205 million] cash reserves to develop Yukon’s [Wolverine] project. To have a chance of rivalling the competing offer, we would have to increase our bid to around one Griffin share for every seven Yukon shares. This is a bit steep.’

The company originally planned to examine the feasibility study on the Wolverine zinc-silver project and cut costs. Goodwin says that while this could result in Barclays Capital withdrawing an agreed $140 million financing agreement, it would have the benefit of cancelling the hedging agreements on selling production from the mine. If Jinduicheng and Northwest succeed in the takeover, Griffin is entitled to a C$2.5 million break fee plus expenses.

Griffin owns 60% of the Caijiaying zinc mine in China. A year ago (Shares 3 May, 2007), Goodwin told Shares that Griffin would buy out most of its joint venture partner’s share of the project, reducing the Chinese partner’s stake to 10%. The plan was part of a wider scheme to also make a major acquisition, neither having yet happened.

Shares says: It is hard to see Griffin winning Yukon but resisting a higher offer shows it won't overpay for deals, which has to be commended.