A group of Metallica Minerals (ASX:MLM) shareholders have banded together to either stop Diatreme Resources’ (ASX:DRX) takeover from going ahead or secure a better offer for smaller investors.
So far shareholders collectively holding 65.8 million shares, representing a 6.9% stake, have joined the group known as Metallica Minerals’ Small Shareholders Action Group (SSAG).
The group first emerged as a substantial shareholder, starting with a combined 5.22% stake, last week.
This follows Diatreme’s submission of an application to the Australian government’s Takeovers Panel seeking orders that Metallica disclose further information about the status of discussions regarding competing proposals and waive the standstill restriction preventing the offer conditions being satisfied.
Diatreme CEO Neil McIntyre tells this news service that would satisfy one of the offer conditions, namely that the standstill be waived, or Metallica confirm that the standstill will not prevent Diatreme acquiring shares in Metallica.
SSAG’s goal is to have the hostile takeover withdrawn or alternatively the Diatreme offer increased to a point that it is considered fair and reasonable to small Metallica shareholders.
Under the current offer, Metallica shareholders will receive 1.3319 fully paid ordinary shares in Diatreme for every one ordinary share in Metallica held.
The group says both Metallica and Diatreme share the same major shareholders so there is little or no detriment to their respective interests in Diatreme if the takeover is successful.
Group coordinator Graham Dow says the group engaged lawyers Talbot Sayer last Friday (24 May) to represent the group in proceeding with the Takeovers Panel action that was commenced by Diatreme.
“Diatreme is seeking an order from the panel to over-rule an agreement (standstill agreement) made in 2023 between Diatreme and Metallica that Diatreme not make a takeover bid for Metallica for a significant period,” he tells Mining.com.au.
“The action group’s concerns are that this breach of trust by Diatreme of the standstill agreement is such that shareholders of Metallica are not comfortable with the potential of Diatreme management controlling their investment.”
The SSAG has also expressed concern over the “large disparity” in the experts’ valuations from Diatreme and Metallica.
Dow says Diatreme’s expert’s valuation does not reflect the advanced stage of the Scoping, Prefeasibility and Definitive Feasibility studies required to bring the Cape Flattery Silica Sand Project in North Queensland into production.
In response to the action group’s concerns, McIntyre tells Mining.com.au that Metallica’s own independent expert reissued their report published in the original Target Statement “materially reducing” the expert’s initial valuation of Metallica.
“Accordingly, the Supplementary Target Statement dated 21 May 2024 states Metallica’s own contribution to the value of the merged group is 27.78% and the offer (if successful) would result in Metallica receiving 26.16% of the merged group,” he says.
Meanwhile, Dow says the shareholder group is also concerned “that the joint venture between Sibelco and Diatreme will result in this foreign multi-nation company taking control of Diatreme (post takeover)”.
While McIntyre declined to comment on speculation, he says Sibelco has been a strong and supportive partner of Diatreme, as evidenced by its substantial investment in the two companies’ silica sand joint venture.
Another concern raised by SSAG is that Traditional Landowners would lose employment and financial benefits that they would achieve should Metallica be left to proceed with its own separate project.
McIntyre says Diatreme has an excellent relationship with the Traditional Owners of the region, pointing to the 10 May announcement of the signing of a negotiation protocol with Walmbaar Aboriginal Corporation RNTBC.
“Diatreme is committed to ensuring the Traditional Owners receive the benefits of the silica sand projects’ development, including employment, training and business development opportunities and other economic spin-offs, while protecting their cultural heritage,” he says.
Diatreme has so far amassed a 56.41% interest in Metallica and has extended its offer to 11 June.
The shareholder group is expecting support for its cause to increase rapidly throughout this week with letters sent out on Monday (27 May) to over 1,300 small shareholders.
By the end of Monday, the group had support so far amounting to 7.4%, just from word of mouth.
“Diatreme Resources respects the views of all Metallica shareholders, whether large or small,” McIntyre says.
“Diatreme Resources is and will be focused on optimally developing the portfolio of assets of the combined entity, including the current Metallica tenements, in the interests of all shareholders, with the aim of becoming a long-term producer of high-quality silica in the Cape Flattery region.
“Diatreme Resources considers its offer to Metallica is attractive and recommends shareholders accept the offer.”
Write to Angela East at Mining.com.au
Images: Metallica Minerals
