Finders Resources has recommended shareholders reject a 23¢-a-share offer for their shares after an independent report called the Eastern Field Development bid “opportunistic and inadequate”.

The report gave the copper miner a valuation of 31¢-35¢, arguing the $175 million offer did not reflect the strong copper price nor a premium for a change in control.

Eastern Field Development, a special-purpose vehicle set up by three Indonesian shareholders of the company representing a combined stake of 19.8 per cent, launched its cash bid for Finders in October.

It argues the company has consistently underperformed by missing production targets at its flagship Wetar copper cathode project in Indonesia.

EFD maintains Finders’ share price would fall significantly if it sold its shares, which it has threatened to do should its bid be unsuccessful.

However, Finders Managing Director Barry Cahill said yesterday he believed the EFD’s bid was suppressing the company’s share price.

Mr Cahill said the company’s management team was working through Wetar’s problems and it was on a path to strong profitability, with Finders planning to use its free cashflow to pay down debt and fund further exploration to extend its mine life.

“We have a very good project and we are operating in a market in which there is strong and growing demand for our product,” he said.

“We think the independent report’s valuation is actually quite conservative.”

Eastern Field Development Director David Fowler said the valuation reflected “a theoretical world of perfection”.
 
He said Finders had not come close to trading between 31¢ and 35¢ because investors simply did not believe the company’s shares were worth that much.

“As Finders has demonstrated since Wetar produced its first copper cathode in 2014, and underlined with its three production downgrades in the past five weeks alone, the operating reality is far different to the value creation Finders once promised its shareholders,” he said.

“We believe we will see a far lower Finders share price once the reality of the Q4 operational result is properly focused upon, and the price will move even lower if the re-ramp up towards nameplate takes longer than expected.”

EFD represents Indonesia’s Procap Partners (Provident), Saratoga Investama Sedaya and Merdeka Copper Gold. Its offer closes on December 20.

Finders shares closed up 0.5¢, or 2.13 per cent, at 24¢ yesterday.

Its shares have traded as high as 27¢ since the EFD bid was announced.

Image: Kalgoorlie Miner/ Finders Managing Director Barry Cahill