Gujarat NRE offers to buy out Australian mineral explorer

The Australian unit of coking coal maker Gujarat NRE Coke Ltd, Gujarat NRE Minerals Ltd, announced on Thursday an unsolicited take-over bid for minerals explorer Rey Resources Ltd. Gujarat NRE Minerals said it would issue one share in itself for every five held in Rey, valuing the latter at around Australian $138 million (around Rs530 crore). The price offered values Rey’s shares at 9 Australian cents apiece, which is 40.6% higher than the price at which it was last traded on Wednesday. Gujarat NRE Minerals bid would fall through if it fails to acquire a minimum of 90% equity stake in Rey. If Gujarat NRE Minerals gets 90% of Rey’s shares, it would under Australian law automatically gain control of the remaining 10% for which it would pay cash and not issue shares. Arun Kumar Jagatramka, chairman of Gujarat NRE Minerals, was a director on the board of Rey until Wednesday. He stepped down a day before his firm unveiled its unsolicited bid for Rey’s 153 million shares.

Gujarat NRE Minerals already owns 16.6% in Rey, a five-year-old company, which says it has proven coal reserves of 500 million tonnes in Western Australia. Rey is also exploring for gold and copper in Peru and Chile. Commercial production in Australia, is unlikely to start until at least two-three years later. Rey’s assets in Canning Basin is expected to yield oil and gas as well.

Gujarat NRE Minerals, which is 82%-owned by Gujarat NRE Coke, operates two coal mines in New South Wales. The company says it is one of the largest producers of coking coal in Australia.