Sylvania Resources has seized the opportunity provided by the current market downturn by Fat Prophets

To say Sylvania Resources has seized the opportunity provided by the current market downturn to implement its aggressive corporate growth strategy is an understatement. Well, the hunter appears to have become the hunted, with Sylvania advising that it has received an approach from a third party that could lead to an offer being made for the company.

The company has noted recent press speculation, together with the recent increase in its share price, and has advised that it has received an approach from a third party. The company is currently in discussions which may or may not lead to an offer for the company. At this stage Sylvania’s board says there is no certainty that an offer will be made for the Company.

Corporate activity is abundant at the junior end of the South African platinum sector and as such it is no surprise that other companies would have been watching and taking notes and can see the rationale of Sylvania’s business strategy.

Sylvania’s medium-term focus on low-cost/low-risk mining positions it strongly as a high-margin PGM producer compared with its underground peers. In addition Sylvania is positioned firmly among the lowest quartile of cash-cost producers of PGMs in South Africa.

The news arrives as Sylvania is in the midst of an off-market takeover offer for two junior ASX-listed companies, SA Metals Limited (ASX: SXM) and Great Australian Resources Limited (ASX: GAU).

The combination of the PGM (platinum group metal) assets of Sylvania and SA Metals should provide an opportunity to create longer-term benefits and value for the shareholders of both companies, through improved scale and penetration of the market for the supply of PGM resources. In addition, the acquisition of Great Australian Resources would strengthen the combined entity's interest in PGM projects in South Africa.

Let’s begin with the SA Metals deal. The board of SA Metals has announced that it is unanimously recommending Sylvania Resources’ all-scrip offer of 1 Sylvania share for every 10 SA Metals shares, in the absence of a superior proposal.

With respect to the takeover of Great Australian Resources, Sylvania Resources has increased its offer for all the shares in Great Australian. The directors of Great Australian have unanimously recommended acceptance of Sylvania's increased all scrip offer of 1 Sylvania share for every 12 Great Australian shares, in the absence of a superior proposal.

The combination of the PGM assets of Sylvania and Great Australian Resources will provide an opportunity to create long-term benefits and value for both sets of shareholders through synergies and enhanced efficiency.

The company’s medium-term focus on low-cost/low-risk mining positions it strongly as a high-margin PGM producer compared with its underground peers. Sylvania is positioned firmly among the lowest quartile of cash-cost producers of PGMs in South Africa.

We retain our strong confidence in Sylvania Resources’ simple but highly effective business model and of course we await further potential developments on the corporate front.

To access more complimentary research reports from Fat Prophets click here.

www.proactiveinvestors.co.uk