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Toronto Venture Exchange-quoted oil and gas explorer Vanoil Energy Ltd is planning to make an offer for fluorspar producer Fluormin in order to get its hands on the Aim company’s cash.
The bid of 0.806 of a Vanoil share, 0.116 of warrant exercisable at 75 cents and 0.572 of a warrant exercisable at $1 for each Fluormin share is effectively a rights issue. At the end of 2012 Fluormin’s NAV was £20.3m, including £7.93m of cash. Fluormin decided to put its Witkop mine on care and maintenance last October because of the weak fluorspar market.
Vanoil estimates that the acquisition should provide cash resources of around $27m, which is the same as the value of the bid, assuming 60 cents per Vanoil share. This assumes the sale of inventories and fixed assets. The cash will be used to finance seismic surveys and drilling.
Vanoil is focused on exploration in east Africa and it is acquiring Avana Petroleum, which has interests in the Seychelles and Kenya.
A subsidiary of Fluormin has provided Vanoil with a $5m loan facility to finance the Avana deal, which was originally announced in November. The loan has an interest rate of 8% and it lasts until 3 March 2014. If the bid does not go ahead then the interest rate will be increased to 12% and 50% of the facility will be repaid in September. Alternatively the loan could be converted into shares and warrants.
The bid has not yet been recommended by the Fluormin board. the bid was announced after trading closed on Friday. At 19.5p a share, Fluormin is valued at £11m.
James Passin is non-executive chairman of both Fluormin and Vanoil. He is also a director of a major shareholder in both of the companies.
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