(Aug 14): The price at which ISR Capital will acquire a major stake in a rare earth mining concession in Madagascar has been slashed by more than 88% to $4.52 million, which is less than what the vendor paid for it in late 2015. And, a third independent valuation of the mining concession, commissioned following queries from the Singapore Exchange, is likely to be “much lower” than the last two valuations.
Did something terrible happen in the rare earth sector? Or, were the first two valuations faulty? Does the reduced price that ISR is now paying have anything to do with a key player in the deal falling out with the company, and its market capitalisation collapsing?
Last year, ISR said it would buy a 60% stake in the rare earth concession in Madagascar for $40 million by issuing new shares at 10 cents each. The vendor of the asset was REO Magnetic, a Singapore company linked to Jonathan Lim Keng Hock, who was in the news recently after claiming a major stake in Alliance Mineral Assets, another locally listed mining company. Interestingly, REO Magnetic had acquired the 60% stake in the rare earth concession only in late 2015 for just €3.7 million ($5.9 million) from a company called Tantalus Rare Earths AG, whose shares traded over-the-counter in Germany.