Lemur Resources' (ASX: LMR) independent directors have formally recommended that shareholders reject Bushveld Minerals' (AIM:BMN) takeover offer of 3 shares for every 5 Lemur shares as neither fair nor reasonable.
One of the key points raised was that unlike Lemur, which has $17 million in cash, Bushveld has limited cash and its ability to continue as a going concern is uncertain.
Bushveld has £430,000 in cash and is seeking additional capital funding of about £1.5 million.
It also noted that not only is Bushveld listed on AIM rather than the ASX, it is tightly held and trading in Bushveld Shares may not be liquid.
The company also indicated that shareholders who accepted the offer would have reduced exposure to Lemur's assets.
It noted that if all of its shareholders accepted the offer, they would receive a total of 112.4 million Bushveld shares representing a 28.36% interest in the AIM-listed company.
Lemur noted that despite its recommendation, the potential consequences of not accepting Bushveld's offer included the possibility that its shares would fall below the current trading price if the Bushveld offer was unsuccessful and no other offers emerged.
The company's operations in Madagascar also carry sovereign risk as the country has from time to time experienced political instability.
Any future political instability could adversely affect the performance of the Madagascan economy and could have a material adverse effect on the market for the Lemur Shares and on Lemur's operations.
There is also no assurance that future political and economic conditions in this country will not result in the government adopting policies precluding foreign development and ownership of mineral resources.
Madagascar's legal system is currently in a state of flux due to the political instability in the country since February 2009.
This could result in difficulty obtaining effective legal redress in courts and a higher degree of discretion on the part of governmental agencies, may arise as a result.
Lemur also faces the risk that permits 3196, 26904 and 27163 will not be transferred while there is no guarantee that the company will be successful in its bid to dispute the validity of a court judgement that declared null and void various historical sale agreements that had granted it Permit 4578.
Bushveld had offered 3 of its own shares for every 5 Lemur shares, saying that the acquisition would create a diversified African junior miner with a swathe of mineral assets spread across South Africa and Madagascar.
The AIM-listed company is focused on exploring and developing mineral projects on the Bushveld Complex in South Africa, and its primary projects are the Bushveld iron ore project and Mokopane tin project.
Lemur shareholders who hold about 40% of the company had previously advised Bushveld that they would accept the offer within five business days after commencement of the offer in the absence of a superior proposal being publicly announced.
Lemur noted it was unclear whether this is a statement of present intention only and capable of being revoked.
Bushveld currently holds 14.3% in Lemur.
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