Sydney Mining Club chairman Julian Malnic has been drawn into a potential takeover hoax for sea-floor miner Nautilus Minerals concocted by Ottawa trader Michael Bailey.

Mr Bailey last week announced a $C238 million ($229 million) hostile bid for the Brisbane-based, Toronto-and-London-listed company of which Mr Malnic was a founder.

The offer sent Nautilus’s shares soaring by up to 40 per cent, but there are fears it is an elaborate hoax. Mr Bailey has announced three other deals in the Canadian market via press releases since 2009 which have failed to eventuate.

Mr Malnic is one of three senior business figures with small shareholdings in Nautilus that Mr Bailey claims to have attracted to his offer. The others include former Nautilus technical consultant Robert Goodden and Michael Jaliman of New York firm True North Advisers. But in all three of those cases, Mr Bailey is understood to have announced their involvement via press releases that were considered premature and followed only brief conversations.

In email correspondence released by Mr Bailey, Mr Malnic said he had been “very unhappy” with the Nautilus board and would join the board if the bid succeeded.

While Mr Malnic told The Australian Financial Review that the correspondence quoted by Mr Bailey was accurate, he had not agreed to join the Nautilus board in the event of a successful tilt.

In a press release on Friday, Mr Bailey said he planned to raise the price of his offer by 13 per cent to $C1.10 a share and now was seeking majority control rather than necessarily 100 per cent of the company.

Shares rose 5 per cent to C62¢ in response, which compares to the C47¢ price before his initial announcement of an offer a week ago.

Mr Bailey, who says he owns a stake in Nautilus which is less than 10 per cent, has yet to file a formal bid circular for the offer and until he does so it cannot be accepted by Nautilus shareholders.

Nautilus shares lost 75 per cent of their value last year and the company was forced to shelve its flagship Solwara-1 sea-floor copper-gold mining project in Papua New Guinea after a financing dispute with that nation’s government.

As of September 30, Nautilus had $US91 million of cash and equivalents and $US288 million in assets

Mr Malnic said he had been disappointed Nautilus had focused all of its attention on PNG under the leadership of former chief executive Steve Rogers rather than hedging its exposure via pursuing projects in other regions at the same time. Mr Malnic said Mr Bailey’s bid for Nautilus, while possibly “fictitiously created” had at least brought some attention to the company’s plight.

“Even a loose cannon like Bailey looks good at the moment,” Mr Malnic said. “He has done more for the share price than the board has in years.”

An internet search suggests this could be the fourth time since 2009 that Bailey has announced a potential deal through a press release service. Other targets have included Vaaldiam Resources, Emgold and Fountain Healthy Aging, with various reasons being given for the collapse. In the case of Emgold, it was the gold project’s “lack of social responsibility for the environment and community”.

 

http://www.afr.com/p/business/companies/malnic_drawn_into_nautilus_takeover_qJ4sK1pPGMeWHDKPEWYnVL