Canadian Royalties says no to ‘lowball’ offer

Canadian Royalties (CZZ-TCRYAF-O), operator of the delayed Nunavik nickel project in northern Quebec, has told its shareholders and debenture holders to reject a hostile takeover offer by Jien Canada Mining, a subsidiary China’s Jilin Jien Nickel Industry Co. and Vancouver-based Goldbrook Ventures (GBK-V, GBKVF-O), because it undervalues the company in a major way.

But Goldbrook’s president and chief operating officer, Brian Grant, is still hopeful that Canadian Royalties shareholders will tender their shares by the Sept. 15 deadline.

“I think knowledgeable shareholders will realize there are very few options here to move this thing forward,” Grant says. “And Royalties has not offered any solutions to its own problems.”

Canadian Royalties president Glen Mullasn would not have anyone believe that he doesn’t have a plan for the Nunavik nickel project.

“We’ve been exploring a range of white knights and potential partners,” he says, explaining that the company is very open to partnering with one or more companies. “There’s an overwhelming majority who are vehemently opposed to accepting a lowball bid … our plan is a valid one and a better one.”

One of those plans is to get debenture holders to convert their holdings to equity. Mullan says that about 35-40% of all share and debenture holdings are based in Quebec and there is a strong interest in seeing this project survive as Quebec-owned entity.

Both Goldbrook and Canadian Royalites have nickel-copper-platinum group metals projects in the Ungava region of northern Quebec, close to Xstrata’s (XSRAF-O, XTA-L) Raglan nickel mine. Goldbrook’s are all at the grassroots stage but Canadian Royalties has a fully-permitted development project that was shelved last summer when the company couldn’t secure enough debt financing to complete construction.

Jien Mining, which produces about 10% of China’s nickel output, has offered $148.5-million in cash for all of Canadian Royalties shares and debentures. In return they’d get a half-way constructed project that could produce 26 million lbs. nickel in concentrate, 38.8 million lbs. copper in concentrate, 900,000 lbs. cobalt in concentrate, 14,500 oz. platinum and 78,600 oz. palladium per year over nine years with the potential to extend the mine life to 18 years.

Canadian Royalties shares were down 2¢ today to 63¢ apiece on a trading volume of 359,000 shares.

Goldbrook shares were down half a penny to 17¢ on a trading volume of 81,500 shares.