Iron sands explorer Indo Mines is onboard with a $4.6 million takeover offer from its biggest investor.

Directors of Indo Mines (ASX:IDO) have “unanimously recommended” that shareholders accept the 2c-per-share offer from leading Indonesian investor Rajawalia Group.

Indo Mines’ share price did not budge from 1.9c following the advice.

News of the takeover offer in November spurred the company’s shares up to a 52-week high of 2.1c, marking a 162.5 per cent gain over the 52-week low of 0.8c Indo Mines’ shares were trading at on September 11.

IDO shares over the past year. Source:
IDO shares over the past year. Source:

Prior to the launch of its offer, Rajawalia held a 57.12 per cent stake through its associates. The suitor has since received acceptances for a further 6.41 per cent, which takes its voting power to 63.53 per cent.

Taking into account Rajawalia’s stake, the offer values the total equity of Indo Mines at $10.76 million.

Indo Mines’ independent expert, BDO Corporate Finance (WA), concluded that the offer was “fair and reasonable”.

BDO also valued the company’s shares at between nil and 1c, with a preferred valuation of 0.3c.

The offer price represents an 11 per cent premium to the 1.8c Indo Mines’ shares were sitting at prior to a trading halt on October 30.

At the end of the September quarter, Indo Mines had $125,000 cash in the bank and US$6.1 million ($8.1 million) worth of loans, including US$1.9 million from Rajawalia. The company’s cash burn for the December quarter is estimated to be about $1.2 million.

Indo Mines told investors the all-cash offer provided an opportunity for them to receive a certain cash amount for their shares, particularly given the uncertainties surrounding the development of the Kulon Progo iron sands project and the status of Indonesian export laws.

The company has been progressing talks with a potential strategic partner to get a trial smelter facility off the ground.

Another factor in the company’s decision to urge shareholders to accept is size of the stake Rajawalia currently has.

If the offer is unsuccessful, this could give Rajawali and its associates “greater capacity to influence the manner in which Indo Mines’ business is conducted”, Indo Mines noted in its target’s statement.

The company believes it is unlikely that a competing offer will emerge.

If the takeover is successful, Indo Mines will be delisted from the ASX. Rajawali said in its bidder’s statement that it plans to drop the listing to reduce corporate administration costs.