Private Thai group to buy Pan African Mining (April 28, 2008)

Hungry for new coal properties outside Southeast Asia, Asia Thai Mining is buying Pan African Mining(PAF-V, PAFRF-O)at an 84.3% premium over the Vancouverbased junior’s 20-day average trading price.

The private Thai group is offering $4 for each Pan African share (as well as outstanding warrants and options) valuing the company at more than $141 million.

In addition, Pan African is spinning off its non-Madagascar assets into a new company with a cash base of $2.5 million. The new entity will incorporate Pan African’s subsidiaries in three other African countries: PAM Botswana, PAM Minerals Namibia and PAM Mozambique.

News of the deal sent Pan African shares surging $1.02 per share, or 36.8%, to close at $3.79 on a trading volume of 545,430.

At presstime, Pan African had a 52-week trading window of $1.62-3.59 per share and about 28.5 million shares outstanding.

The deal brings the financial and technical resources that may be required to bring Pan African’s Madagascar properties into production, Irwin Olian, Pan African’s chief executive officer says. It’s also very good for shareholders, he adds, and provides liquidity at a reasonable valuation in a difficult financial environment.

“I think the pricing is fair and equitable for our shareholders — it gives them a nice return on their investment,” Olian says from Los Angeles. “Here’s one where everybody has made a profit and compared with a lot of other equities that are down twenty, fifty, eighty per cent — it makes us look very good.”

Olian notes that this year has been among the most difficult for financial markets and Pan African was “victimized” like most everyone else. The extent of the damage done to liquidity was so great that buyers were few and far between and Pan African’s shares suffered as a result.

“The challenge for Pan African was to find the resources both financially and technically with which to develop our large portfolio of properties and I think it became abundantly clear that the viability of advancing the projects was to some extent affected by the market conditions because it affected our ability to raise capital and the price at which we could raise capital.”

Olian says Asia Thai — given its fairly deep pockets and mining expertise — is in a position to develop the Madagascar properties faster than Pan African could have.

“The government of Madagascar is eager to get these coal assets into production and we think the Asia Thai guys are smart and well experienced and well funded and they should be able to move these projects along and into production relatively quickly without being concerned with market conditions,” Olian adds. “And that’s an important consideration for the government and the people of Madagascar.”

Headquartered in Bangkok, Asia Thai Mining is a holding company that directly or through its affiliates has developed and operated mines, particularly in the coal sector. Its subsidiaries are exploring and developing several coal projects in Indonesia and Thailand.

Of primary interest to Asia Thai Mining are Pan African’s coal properties in southwestern Madagascar. Within Pan African’s 650-sq.-km licence area, coal-bearing sediments in the Sakoa and Sakamena fields already have been identified along 27 km of strike.

Historical data suggests that coal seams of economic significance “may occur over almost the entire strike length,” Pan African states on its website.

Seam thicknesses of up to 5 metres from near surface to depths of over 170 metres have been recorded. Coal qualities are varied, but Pan African says the raw coal ash content of the thicker and more ubiquitous No. 4 and 5 seams are usually around 15-35%.

Pan African points out that limited data on the washability of the coal suggests that it can yield a product “suitable for the thermal export market.”

Asia Thai Mining will be getting many more assets than just coal from this acquisition, however.

Pan African has about 7,500 sq. km of diversified mineral properties and 5,000 sq. km of uranium properties in Madagascar. Apart from coal and uranium, it is exploring for gold, precious stones, base metals and industrial commodities.

Asia Thai “is a company that already has several operational coal mines in Asia, so it’s fair to say their primary focus is coal and they are very interested in our coal projects,” Olian says. “But they also recognize the value of our uranium and gold projects. We spoke to them about just buying our coal projects and they said they were interested in the total package of our projects in Madagascar.”

The Vancouver-based company is also exploring two regions for gold and metals in Mozambique under agreements with other companies, and holds about 5,500 sq. km. of diamond licences in Botswana.

The transaction is expected to close on May 31.