Dacha Strategic Metals Inc. (“Dacha”) (TSX VENTURE:DSM)(OTCQX:DCHAF) and Aberdeen International Inc. (“Aberdeen”) (TSX:AAB) are pleased to announce that they have entered into a definitive agreement (the “Business Combination Agreement”) pursuant to which Dacha and Aberdeen will, subject to shareholder, court and regulatory approvals, enter into a plan of arrangement pursuant to which Dacha will acquire all of the outstanding shares of Aberdeen and Aberdeen will become a wholly owned subsidiary of Dacha (the “Transaction”).
Quoting a from a free newsletter I subscribe to. (http://www.geckoresearch.com/blog)
“Dacha + Aberdeen – What happens now?
Yesterday after markets closed, a news release announced the friendly merger between Dacha and Aberdeen, two Forbes & Manhattan companies. We have owned and followed Dacha closely for almost 18 months and we have been well aware of the Aberdeen story as well. We think the deal is fair for both companies on a strict economic basis.
At first sight, we thought that this looked to be a great opportunity for Aberdeen since we know that they have wanted to grow the company in size for a long time. This merger gives them that.
After listening to the conference call a few hours ago, and also always keeping in close contact with Dacha’s CEO, we suspect that this deal might be a necessity for Dacha at this point. We know for a fact that the company has tried to sell their inventory for a lengthy period of time without any success. Why this has failed is the million dollar question, but most likely it’s mostly because of the difficult world economic conditions plus the smuggling of HREE out of China.
With Dacha facing the risk of not selling any inventory for an even longer period going forward, this deal will at least give shareholders something through Aberdeen’s portfolio.
We bought DSM to get the best exposure to Heavy Rare Earth’s at the lowest risk and with this merger that exposure is fading away. To us it is very clear that this will be the end of Dacha as a HREE play and we will therefore look to exit our holding over time.
Why “over time” and no hurry? Well, through Aberdeen we get exposure of Sulliden (SUE.TO), a very strong take-over target, which might happen sooner rather than later as they are expected to release a feasibility on their flagship property this fall.”
Is the REE prices not quite what they seem to be?
@Rikard
It’s not necessarily the prices (though you should take into account the difference between FOB China and the widely quoted price) but the market that is esoteric. Most relevant in the case of Dacha is that there isn’t much of a market at all for rare earths as a raw product. Users who don’t continue to buy from their “regular” suppliers risk having that source dry up or go to another party in the longer term. Also as prices are dropping, users are reluctant to add more inventory beyond just-in-time (especially with grey market quantities from now illegal Chinese ionic clay operations still available). Finally as with most things it is much easier to sell into a rise than a drop (especially when Dacha’s own accumulation of HREE inventory helped drive that rise by taking product off the market and creating tight supply).
@silverax
Thanks for the comment!
Thanks a lot Rickard !
@1mh0tep
You’re welcome!
Almost unbelievable! The company has a market value of 11 M c$ and is going to pay 4.85 M $ to “certain former executives and consultants” as “Termination Payments”. Dacha has delivered a lot of value! But just to its esecutives while destroying shareholders. Why does the canadian law permit such a steal?
@Giuseppe
Why the late reaction? This was already known in November 2012, when the material change report was approved.
If the shareholders didn’t like it, they should have voted against it in the meeting on November 28. If the shareholders approve it, why shouldn’t the Canadian law permit it?
It is clear why this merger was made: to have a reason to pay out these termination payments.