Amur Minerals (LON: AMC) is down a little today as the board reacts to the suggested takeover from Ascent Resources. This seems like a fair enough reaction actually, a certain interest but not too much. For it's not wholly obvious that this is to the benefit of Amur shareholders. It really seems like a disguised - not illegally disguised, but opportunistic all the same - rights issue by Ascent. As we say, it's not entirely obvious why Amur shareholders would want to take part in that process.
As background Amur was in the business of prospecting for nickel and copper in the Russian Far East. They were doing well too, looking to reopen old workings with the use of new technology. This often does happen, when extraction techniques advance the best place to deploy them is often at old workings. After all, we know there was nickel there, perhaps they stopped mining the ore because the old methods weren't economic, but the new ones might be on those lower grades left.
Of course, this then led to problems given the Ukraine issue. So, Amur has bundled up those interests and is in the process of selling them and receiving cash in return. This leaves Amur as a cash shell - a pile of cash and a quotation and that's about it.
Amur Minerals share price from London Stock Exchange
We can see the effect of the Ascent bid suggestion there. But that potential bid is an all share one. So the effect is that Amur shareholders, who currently own a pile of cash, end up owning shares in another junior miner with projects of whatever value in Latin America. The real effect of this is to have a rights issue for Ascent. If they need more cash then they can issue stock to get it. Here they're issuing stock and gaining Amur's cash. So, why are they buying Amur rather than just having a rights issue?
That's the thing Amur's shareholders need to think through. Given that Ascent is only buying cash then why are they? Is their stock worth that cash in fact? Which might explain some of the Amur board's hesitancy.
For there's also an entirely different outcome possible. Amur is listed, has cash - why not go looking for buying opportunities itself? It's not as if there's a shortage of interesting mining opportunities out there, several of which could be advanced to a more valuable stage by the application of £5 million in cash.
We'll have to see but we wouldn't think it will be a slam dunk that Ascent will complete what is, really, just that disguised rights issue.
