‘Logic error’ could force Kasbah to dump merger with AMR
Kasbah Resources relied on a “fundamental logic error” to justify its support for a deal with a Russian billionaire.
The World Bank-backed tin play Kasbah Resources relied on a “fundamental logic error” to justify its support for a controversial deal with a shadowy Russian billionaire, according to an assessment by leading accountancy firm Deloitte.
Deloitte’s examination of the independent expert’s report, originally prepared by BDO, identified a major flaw in the study that could potentially force Kasbah to scuttle its proposed merger with Canadian-listed Asian Mineral Resources.
Kasbah entered a trading halt on Wednesday pending the release of an update, possibly by the day’s end, on the deal.
Should the company agree with the findings of the Deloitte report it may have little choice but to withdraw its support for the union with AMR or at least push for a delay.
The study by Deloitte’s national mining leader Nicki Ivory, lodged as an affidavit in WA’s Federal Court on Monday ahead of a hearing into the proposed union next week and obtained by The Australian, found that the BDO report erred by miscalculating the number of shares in the merged Kasbah and AMR.
Correcting the alleged mistake suggests that the offer values Kasbah at between 2.3c and 3.2c a share, down from the 2.9c to 4.1c value originally attributed to the offer by BDO and short of BDO’s own 3.3c to 3.9c a share valuation of Kasbah.
“BDO reached its conclusion on fairness because it made a fundamental logic error, which has resulted in the incorrect calculation of the value of the scheme consideration per Kasbah share,” Ms Ivory says in the affidavit.
The alleged mistake may also have ramifications for BDO, given the time and money invested by Kasbah in executing the deal since BDO declared the AMR offer as fair and reasonable.
Minority shareholders, led by financial adviser David Willis and veteran corporate adviser Peter Stern, have been fighting the proposed AMR deal, which comes just as tin prices have started to rebound from multi-year lows.
The Australian revealed on Saturday that the Australian Securities and Investments Commission was scrutinising the proposed union with AMR, which is controlled by Russian billionaire Vladimir Iorich.
The Deloitte investigation is also critical of other aspects of the BDO report, including its valuation of AMR’s mothballed Ban Phuc nickel mine in Vietnam, which was shut earlier this year due to the low nickel price.
BDO valued Ban Phuc and its associated processing plant at $14.7m, but Ms Ivory argued the asset should be valued at just $US1.5m to $2m given the mine was not economically viable and had no delineated resources.
Kasbah, which aims to develop the Achmmach tin deposit in Morocco, is 17.7 per cent owned by the World Bank. Shareholders voted 92 per cent in favour of the AMR deal at a meeting late last month.
The company could not be reached for comment.
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