This morning South32 Ltd (ASX: S32) presented an all-cash offer to acquire the remaining 83% of Canadian resources company Arizona Mining – in which they already have a 17% interest – at C$6.20 per share. The offer is worth approximately A$1.75 billion and entails a 50% premium on the target’s last closing price.
Toronto-listed Arizona Mining owns the zinc-lead-silver Hermosa project, which includes two polymetallic deposits and land with potential for discovering additional reserves. According to an assessment conducted by Arizona Mining in January, Hermosa is a low cost, long life project that could deliver a very high return on investment.
Thanks to its minority share, South32 has been present on Arizona Mining’s board and operations committee since May 2017, gaining deep knowledge of the business.
The transaction is not subject to regulatory approvals, and should be completed in the September quarter. The required shareholders approval looks probable as Arizona Mining directors, who own 34% of the company, have already unanimously endorsed the proposal.
Despite the news, the South32 share price fell 1.7% to $3.84 on Monday, in a generally negative day of trade for resources stocks. At the time of writing, industry peers BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) are down 2.7% and 2.4% respectively.
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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.