Cannon Resources Limited (ASX: CNR) has entered into a Bid Implementation Agreement (BIA) with Kedalion Nickel Pty Ltd, a wholly owned subsidiary of critical minerals focussed private equity fund, Kinterra Battery Metals Mining Fund, LP.
Pursuant to the BIA, Kinterra will offer to acquire all the ordinary shares in Cannon including those issued upon exercise of options via a unanimously recommended conditional off-market takeover offer of A$0.45 per share, less any dividends or distributions.
Offer Consideration
Under the terms of the Offer, each Cannon Shareholder will receive a cash offer of A$0.45 for every Cannon Share held, representing a:
• 43% premium to Cannon’s last closing share price of A$0.315 on 28 October 2022
• 55% premium to Cannon’s 5-day VWAP of A$0.2901
• 58% premium to Cannon’s 30-day VWAP of A$0.2851
The Offer implies a fully diluted equity value for Cannon of approximately A$45 million
Cannon’s Board Recommendation
Cannon’s Board of Directors unanimously recommends that Cannon Shareholders accept the Offer, in the absence of a superior proposal.
Cannon’s Directors have confirmed their intention to accept the Offer, in the absence of a superior proposal and also intend to exercise their options and to accept the Offer for the resulting Cannon shares, in the absence of a superior proposal and subject to the Cannon shares being released from ASX escrow restrictions
Cannon Board Commentary
“Kinterra’s offer creates an excellent opportunity for Cannon shareholders to realise value for their investment whilst moving the asset to Kinterra who can take Fisher East to the next stages of development. Fisher East is at an inflection point and this transaction removes the risks and equity dilution associated with the next phase of intensive project development work,” Chairman, Alex Passmore, said.
Shareholder Support and Pre-Bid Acceptance
Kinterra has a relevant interest in 17.1 million Cannon Shares representing approximately 19.99% of all Cannon Shares on issue. Kinterra’s relevant interest is as a result of certain Cannon Shareholders, including Cannon’s largest shareholder, Ponderosa Investments WA Pty Ltd (15.5%), entering into Pre- Bid Acceptance Agreements with Kinterra to accept the Offer, subject to certain conditions.
Reasons to Accept the Offer
• Liquidity and certainty of value – The 100% cash Offer Consideration provides Cannon Shareholders with certainty of value for their Cannon shares and the ability, upon satisfaction or waiver of the conditions, for all Cannon Shareholders (and option holders who exercise their options) to realise that value in what is currently an illiquid company. In the last month, Cannon traded less than A$1 million on ASX, compared to this Offer value of A$45 million at a substantial premium to market.
• Compelling premium – Kinterra’s A$0.45 cash Offer Consideration represents a 43% premium to Cannon’s last closing share price and a 58% premium to Cannon’s 30-day VWAP.
• Support of Cannon Board and shareholders – Cannon’s Board of Directors have confirmed their intention to accept the Offer and unanimously recommends that Cannon Shareholders accept the Offer, in the absence of a superior proposal. Major Cannon shareholders
representing 19.99% of Cannon have entered Pre-Bid Acceptance Agreements with Kinterra to accept the offer.
• Risk mitigation – The proposed transaction mitigates the risks and uncertainties of remaining a Cannon Shareholder, including near-term capital requirements (and associated shareholder dilution) as well as project development and technical risk. This is particularly relevant given the current volatility in global markets.
Impact on Cannon option holders
Cannon option holders will be required to exercise their Cannon options and accept their Cannon Shares into Kinterra’s Offer prior to the end of the Offer Period in order to receive the same A$0.45 Offer Consideration as all Cannon Shareholders under the Offer (assuming the Offer becomes unconditional). For Cannon option holders, this represents a 50% premium to the $0.30 exercise price of Cannon options.
Overview of Cannon
Cannon Resources Limited is a Western Australia focused nickel exploration company with two core projects, Fisher East and Collurabbie. Both Projects are located in the northern Goldfields region of Western Australia, approximately 200 km north-east of Leonora.
Cannon’s flagship project, Fisher East, hosts four high grade nickel sulphide deposits all in close proximity to each other.
These are the Musket, Camelwood, Cannonball, and Sabre nickel sulphide deposits. These deposits, all located on 100% Cannon tenements, have a combined JORC 2012 Mineral Resource containing 134,100 tonnes of nickel at an average grade of 1.8% nickel.
For further information please visit: https://cannonres.com.au/
