Canning Basin coal company Rey Resources (ASX: REY) and its management have found themselves in a tussle for control of the company.
First, Gujarat NRE Minerals (ASX: GUJ) lobbed an offer at 9 cents per share, or a share offer of 1 GUJ share for 5 REY shares. This did not get the attention of many REY shareholders.
Now Hong Kong merchant bank Crosby Capital has served up a new offer to acquire all REY shares, offering 19.5 cents cash per REY share. With the current REY share price, of 19.5 cents, this offer will at least get attention from REY shareholders.
The prize. REY owns coal, alot of it, covering large areas in the Canning basin of Western Australia. How much will take time to figure out.
REY defined a 511 million tonne JORC resource at Duchess Paradise in the Canning Basin in June 2009. And announced the resource is the subject of a pre‐feasibility study to investigate its potential to support an initial two million tonne per year thermal coal export operation using existing port infrastructure.
However, this resource may just be the tip of an iceberg.
Recently, Kevin Wilson managing director of Rey Resources said a new drilling program is targeting 1‐2 billion tonnes of coal above 350 metres depth.
Wilson is convinced there is a whole lot more coal in the tenements, and current valuations for REY do not take this upside into account.
What would not have escaped Gujarat's and Crosby's interest is a recent report concluded there was potential in REY's huge 8,000 sq km lease area in the Canning Basin, for near surface 9‐11 billion tonnes of potential coal (<350 metres depth).
Now this is a situation that has suddenly became even more interesting, with Crosby's offer. In a world where coal shortages will likely become critical in 2012, the prize is real.
Coal India, the world’s largest miner of the fuel, said it wants to import 50 million metric tons of thermal coal a year from Australia, Indonesia and Mozambique from 2016 to meet an expected rise in power demand.