Why PanAust Shares Skyrocketed Today

What Happened to PanAust Shares?

Shares of PanAust Limited [ASX:PNA] shot up more than 34.18% Tuesday after major shareholder and Chinese state-owned Guangdong Rising Assets Management (GRAM), proposed a non-binding offer on the company for $2.30 per share. The company closed at $2.12 per share.

Why Did This Happen to PanAust Shares?

Put simply, the transaction values the stock at more than $1.4 billion. However, the company won’t support the bid, saying in an ASX statement, ‘that [the bid] price remains materially below the level at which the Board would be prepared to recommend a takeover offer to its shareholders.

The bid comes at a time when the company is trading well below its 2011 high of $4.55 per share and is likely intended to control two major projects within months — the D’Oro project in Chile and Glencore’s Frieda River project in Papua New Guinea. Guangdong Rising currently holds a 22.84% stake in the miner.

What Now for PanAust Shares?

PanAust is a $1 billion Australian-based copper/gold producer. The company has upgraded its production guidance for from 65,000 to 70,000 tonnes of copper and 160,000 to 165,000 ounces of gold for the 2014 calendar year.

It’s a simple fact that the resource sector is out of favour. Money has chosen to flow into high yielding stocks and Tech stocks instead. Since the beginning of 2013, the share price has drifted down from the $3.00 per share level.

The bid shows the true intentions of Chinese — they want Aussie resources. Now that they are cheap, they are coming to get them.

With the share price hovering below the offer price of $2.30, investors are sceptical of whether the bid going through. Either GRAM will upgrade its bid and the share price will go higher or GRAM will drop its bid and the share price will fall. Either way, shareholders could be left wondering ‘what’s next’ for a while.
At the moment, it’s more likely that the share price will track sideways for a while until management provide more information on the takeover proposal.

Jason Stevenson+
Resources Analyst, Diggers and Drillers

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