Noront bid to be rejected; 'a lot of lies' in Noront press release

Freewest Resources (FWR-V) president and CEO Mackenzie Watson says he will "absolutely" reject a hostile takeover bid from "Ring of Fire" rival Noront Resources (NOT-V), once he receives the official offer, sometime during the next two weeks.

"(Noront management) are hired guns and hired guns are not out there to find anything, they're out there to grab something," Watson says.

Watson flatly denies Noront's suggestion in its Oct. 5 press release that "friendly" takeover negotiations for Freewest had broken down.

"There are a lot of lies in there," says Watson, in reference to Noront's release. "They (only) called me after I had left the office on Friday. You can't believe everything they say."

Noront is offering one share for four shares of Freewest. The bid implies a price of $0.3975 per share, a 51% premium to Freewest's 30-day volume-weighted average price before Oct. 2. The offer valued Freewest at slightly less than $90 million.

Shares in Freewest closed at $0.40 on Oct. 6, a day after the bid was announced. Noront shares, meanwhile, closed at $1.61 for a market cap of about $264 million.

Noront CEO Wes Hanson said Freewest shareholders are "being invited to benefit from the enhanced opportunities that the offer presents. We look forward to Freewest's shareholders participating in a larger, more liquid company with approximately $37 million in estimated working capital to realize the full potential of the combined properties."

Noront is interested in Freewest's Black Thor, Black Label and Big Daddy chromite properties near McFauld's Lake, in far northern Ontario. Spider Resources (SPQ-V) and KWG Resources (KWG-V), two other players in the McFauld's camp, are earning a 60% interest in Big Daddy.

Freewest's chromite deposits are quite close to Noront's Blackbird One and Blackbird Two chromite deposits.

Micon International is calculating a National Instrument 43-101-compliant estimate for Blackbird One and Two, while Freewest continues to drill Black Thor with the hope of having a resource estimate by the end of the year.

Black Thor is thought to be the largest chromite deposit in the camp.

"I didn't think our chromite was any good. (Noront) has been saying our chromite is no good and theirs is the best so I don't understand it, really," Watson says, with measured sarcasm.

Lost in the shuffle but unlikely lost on Noront is Freewest's 4.1 million shares in Quest Uranium (QUC-V), which closed at $3.04 per share on Oct. 6. That values Freewest's Quest stake at $12.4 million.

Despite his contempt for Noront's offer, Watson suggested he would be interested in a straight cash deal for Freewest's chromite deposits but said he wants to keep Freewest and its Quest shares.

Watson says he would most likely dividend the cash from any such sale out to shareholders.

Freewest recently finished making presentations to several Toronto brokerage houses and had managed to get its share price to $0.32 on Oct. 2, up from $0.25 on Sept. 25.

Watson believes that sudden price increase prompted Noront's bid.

It should be noted that Noront's offer is not a "Permitted Bid" under Freewest's shareholder rights plan. That means the Freewest board must be either kill its shareholder rights plan or Noront will need to go before a judge and make the case that its bid should proceed.

Watson, for his part, is primed for a fight.

"May the best man win," he says.

Noront Resources (NOT-V) president and CEO Wes Hanson says that before making an unsolicited bid for "Ring of Fire" neighbour Freewest Resources (FWR-V), Hanson and his team were prepared to spend last weekend in Montreal negotiating a "friendly" bid but were "rebuffed" by Freewest chairman and CEO Mackenzie Watson.

"We desperately tried to engage Freewest over the weekend," Hanson says. "We wanted to negotiate. We were rebuffed."

Hanson says Watson's lack of interest in discussing a deal left Noront little choice but to launch a hostile takeover attempt.

Watson told Mining Markets earlier this week that Noront had left a message at his office on Friday, Oct. 2, after he had gone home for the weekend.

Noront is offering one share for four shares of Freewest. The bid implies a price of $0.3975 per Freewest share, a 51% premium to the 30-day volume-weighted average price before Oct. 2. The offer valued Freewest at slightly less than $90 million.

Freewest shares closed at $0.415 per share in heavy volume on Wednesday, while Noront's shares soared 16.15%, to close at $1.87.

"If you look at the market since the deal was announced, it is sort of justifying that a four-to-one share ratio is good," Hanson says.

Hanson sends this missive to Watson: "You demonstrate to me why the value we've offered to your shareholders isn't acceptable, and I will demonstrate to you why the value is (acceptable), instead of fighting it out through the press, which is probably the least effective way of doing things."

The rise in Noront's shares could also be attributed to a soon-to-be-released volley of drill results from the company's flagship Eagle's Nest nickel-copper-PGMs project in the McFauld's Lake area, also known as the Ring of Fire.

Noront said it would publish the next round of results before its annual general meeting, scheduled for Oct. 15.

If Noront's takeover bid proves successful, it would make Cliffs Natural Resources (CLF-N) a Noront shareholder. Despite Cliffs owning slightly less than 10% of Freewest on a fully diluted basis, and almost 20% of KWG Resources (KWG-V), another chromite player in the Ring of Fire, Cliffs has yet to knock on Noront's door.

Cliffs boasts a market cap of US$4.32 billion, has iron mines in Canada, steel making operations in the U.S., and imports ferrochrome from operations in South Africa.

Ferrochrome is the end-product of refined chromite and it's essential in the stainless steel making process.

"It's not like a larger chromite deposit wouldn't be of interest to Cliffs," Hanson says.

Meanwhile, Hanson questioned any suggestion by Watson that Noront had been critical of Freewest's chromite deposits.

"I don't think anybody at Noront has ever downplayed or denigrated Freewest's chromite assets," Hanson says.

Indeed, Freewest's Black Thor, Black Label, and Big Daddy chromite projects are thought to have the greatest tonnage in the camp. Most of the chromite deposits found to date at McFauld's Lake are high grade and have similar chromite-to-iron ratios.

Hanson admits his company's Blackbird One and Two chromite deposits are likely smaller than Freewest's Black Thor. Both projects should have official resource estimates by the end of January 2010.

In a curious footnote to Noront's bid, in addition to a shareholders rights plan, it seems Watson is entitled to a $4-million cash-out in the event of a takeover. Noront's bid requires that Watson's payout be capped at $1.5 million.

"I've never seen anything like that in twenty-five years in (the mining) business," Hanson says. "(The payout) is certainly more than what I (would) get. I don't even have a half-a-million-dollar cash-out."