Forsys Takeover Deal May Be On The Ropes

It’s been a wild ride for Forsys Metals (FSY-T, FOSYF-O) shareholders since George Forrest International Afrique (GFI) said it would need more time to pay up for the company and its Valencia uranium deposit in Namibia.

Until news of the delay was released on March 13, GFI’s proposed acquisition had been one of the mining world’s few feel-good stories in recent months, outside of gold.

Prior to the offer, Forsys shares had closed as low as $2.50, but GFI’s $7-per-share pitch — announced on Nov. 14 — sent the stock climbing towards the offering price, closing as high as $6.35 on March 10.

The fact that Forsys shares didn’t get closer to the $7-mark can be read as a reflection of the market’s wariness of any proposed deal — wariness that proved at least partially justified with news that GFI needed more time to come up with the money.

Originally, the closing date was set for March 18, but Forsys has extended it to July 31.

The extension had investor internet boards rumbling that the chairman and sole shareholder of GFI, George Forrest — a Belgian national well known for his large presence on the mining scene in the Democratic Republic of the Congo — may find it easier to pay the break fee and walk away from the deal given worsening economic conditions.

To make backing out more difficult for GFI, Forsys said in March that it was trying to increase the break fee to $20 million from $11.4 million.

And word on April 2 that Forsys had indeed secured such an agreement sent its shares back up about 40¢ to the low $5-range.

The $20-million break fee gives added insurance that GFI is indeed still serious about the bid and has the ability to raise the funds.

“If they can’t put up $20 million, it wouldn’t give us a lot of confidence that they could get the $580 million (the total acquisition cost),” Forsys chief executive Duane Parnham says.

Forsys also attached a provision to the new deal that GFI would have to provide security for the entire new amount and that Forsys would be able to draw from it for business purposes as needed.

Forsys’s key asset, the Valencia uranium deposit, sits 35 km along geological strike from Rio Tinto’s (RTP-N, RIO-L) Rossing uranium mine. The latest resource estimate put measured resources at Valencia at 24.5 million tonnes grading 0.0149% U₃O₈ for 8 million lbs. U₃O₈; indicated resources at 188.7 million tonnes grading 0.0128% U₃O₈ for 53 million lbs. U₃O₈; and inferred resources at 76.9 million tonnes grading 0.0119% U₃O₈ for 20 million lbs. U₃O₈.