Waratah rejects bid by Aussie company

Waratah Coal (WCI-V, WRTHF-o) says a partial takeover bid by Mineralogy Pty. undervalues the company’s Galilee Basin coal project in eastern Australia and has advised shareholders to reject the $1.41-per-share offer.

Mineralogy, a private Australian company backed by billionaire Clive Palmer, holds about 14% of Waratah and was attempting to acquire a total 51.1% interest in the company for about $38 million.

Waratah’s financial adviser, Merrill Lynch, says the offer doesn’t give shareholders a premium for control and is at a discount to comparable coal transactions.

The company also says the offer was timed to take advantage of the current financial crisis, which has hit exploration companies hard. Waratah shares have fallen from about $4 apiece in June to a current price of $1.32.

Waratah’s share price also fell in September by 62% to 70 on news that the Australian environment ministry had rejected a proposal for a US$3.7-billion rail and port infrastructure project. Waratah had hoped to link its Galilee Basin project by a 495-km rail line to the Queensland coast. The project has an inferred resource of more than 4.3 billion tonnes of thermal coal.

Waratah says it has been working with the government on other rail and port opportunities, pointing out that Queensland has declared the project to be of “state significance.”

The company says it has signed confidentiality agreements with other companies and has been pursuing more attractive offers.

Mineralogy, which estimates it holds about 160 billion tonnes of magnetite iron ore in projects in Western Australia, has not stated its plans for the Galilee coal project.

But Palmer, the chair of Mineralogy, is in the midst of launching a resource giant, Resource Development International (RDI), to supply iron ore, nickel and energy to China. Mineralogy has signed major deals with Chinese companies for iron ore.

In August, RDI offered 3.14 times the AIM closing share price for Gladstone Pacific Nickel, a company in which Palmer already held a 13.95% stake.

Palmer also made a proposal to merge RDI with junior iron ore explorer Australasian Resources (ARH-a). Palmer holds a 66.4% interest in Australasian. The deadline for the offer has been moved to March 2009 from September 2008.