Bauxite Resources says it will give $10.7 million back to shareholders as it tries to win them away from an enticing takeover offer.

The miner (ASX:BAU) is promising a 5c a share capital return from the $16.2 million in cash its holding on its books, to be approved by shareholders before March.

Its suitor, a subsidiary of corporate raider Mercantile Investment Company (ASX:MVT), is offering shareholders 6c a share cash back.

Mercantile is chasing that juicy pocketbook. In early November it fired off a 9c a share offer for 50 per cent of the company’s shares that it doesn’t own, valuing the business at $19.3 million.

Mercantile already owns 3.3 per cent of the miner.


If the takeover succeeds, Mercantile will immediately pay shareholders 6c a share, terminate a joint venture with HD Mining & Investment, and stop all exploration activities.

It also plans to sell off all Bauxite’s (ASX:BAU) assets, including two farms, and pay the proceeds to shareholders once debts have been cleared.

Mercantile is accusing Bauxite of wasting shareholders’ time and money.

“The best use of remaining surplus cash is back in shareholders’ hands.”

“Bauxite first listed on ASX in 2007. It has never found anything remotely viable and has chalked up losses of $48 million in the process.

“The latest annual report states: ‘The company is also looking for other business opportunities to better utilise cash resources’. We regard that statement as ominous.”

Bauxite has been contacted for comment. It was trading slightly under the offer price at midday on Friday at 8.6c.