(CP) – 5 days ago

MONTREAL — The board of Canadian Royalties (TSX:CZZ) rejected a $148.5-million hostile takeover bid from China-based Jien Canada Mining Ltd. Tuesday as inadequate and opportunistic, and said it may seek out other bidders for a better offer.

"The board concluded that the Jien offer substantially under values Canadian Royalties and fails to recognize the strategic value of the Nunavik Nickel Project," CEO and board chairman Glenn Mullan said during a conference call.

"We really do feel that this is a lowball bid and that they could put much more on the table."

Mullan also said the timing of the Jien offer was "incredibly opportunistic" with depressed prices for nickel, and when Canadian Royalties is trading "at a significant discount" to its peer group.

"Nunavik Nickel is currently on care and maintenance due to an unprecedented period of turmoil in the bank markets, which makes obtaining and concluding financing difficult," he said.

"Clearly, Jien would be adding significantly to its production base without paying anywhere near the value it gets for its own production."

Goldbrook Ventures Inc. (TSXV:GBK) and Jien Canada proposed the takeover Aug. 10, offering about $148.5 million in cash, including accrued interest on debentures. The deal values its shares at 60 cents each.

Canadian Royalties is a mineral exploration company whose principal active area is the Raglan mining district in the Nunavik region of northern Quebec.

Jien Canada Mining is a division of China-based Jilin Jien Nickel Industry Co. Ltd.

Goldbrook explores for nickel-copper-platinum sulphide deposits and is the single largest holder of mineral rights in the Raglan district, which is host to global miner Xstrata's Raglan nickel-copper-PGE mine.

Mullan called Jien said the offer does not reflect an adequate premium for control of Canadian Royalties.

"The premium that is being offered to shareholders at 25 per cent is well below premiums paid in precedent transactions and in particular much lower than the 63 per cent premium offered in unsolicited metals and mining transactions for Canadian targets," he said.

"Clearly this premium is not sufficient when considering the strategic value of the Nunavik nickel project."

Canadian Royalties also said Jien's offer was "highly conditional, including a particularly open-ended People's Republic of China approval condition" that could prove difficult to obtain.

"History has shown that Chinese government approval is not necessarily available for hostile transactions, and this bid by Jien is certainly as hostile as it gets," said Mullan.

The Canadian Royalties board unanimously recommended rejecting the offer from the China-based Jien, and said it would "aggressively pursue value-maximizing alternatives, including a sale to a third party or parties."

Shares in Canadian Royalties rose two cents to 60 cents in Tuesday trading on the Toronto Stock Exchange. On the junior Venture Exchange, Goldbrook shares were unchanged at 18 cents.