Sundance in last-ditch talks on $1.4 billion takeover by Hanlong

MELBOURNE Tue Mar 26, 2013 12:02am EDT

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MELBOURNE (Reuters) - Australia's Sundance Resources (SDL.AX) said its suitor Hanlong would fail to meet a deadline on Tuesday to show credit approval for its long-delayed $1.4 billion takeover offer, and the companies would decide after April 3 whether to scrap the deal.

The decision to enter five days of talks on whether to salvage the deal came after Hanlong Mining Chairman Liu Han was reported by Chinese media to be under police investigation for harboring his younger brother, a murder suspect.

"If the parties fail to reach agreement during that period, either party may then terminate the SIA (scheme implementation agreement)," Sundance said on Tuesday.

Liu's detention was the latest setback in a deal first announced in October 2011, after Hanlong had acquired a 14 percent stake in Sundance targeting the company for its $4.7 billion Mbalam iron ore project in Africa.

Sundance had remained committed to the deal even after some Hanlong executives in Australia were charged with insider trading, Chinese authorities held up approvals and Hanlong cut its offer by more than a fifth.

The Chinese government ordered Hanlong to line up a major Chinese company to help it develop the Mbalam project on the border of Cameroon and Republic of Congo, but those talks have stalled following the detention of Liu Han.

"My understanding is talks had progressed substantially. But obviously with the events that have happened recently, we're unsure about their ability to progress," Sundance Managing Director Giulio Casello told Reuters.

He declined to predict whether the deal will be terminated.

"I don't want to commit to anything. What we'll do is have the discussion and we'll make a decision from that," he said.

A Hanlong spokesman declined to comment on the deal but said Hanlong deputy executive Kang Huan Jun was leading the talks with Sundance and had been throughout.

Investors have been betting the deal would not go ahead due to the Chinese government's reluctance to back Hanlong. Sundance's shares last traded at 21 cents, less than half the value of Hanlong's 45 cents a share offer.

The stock has been suspended from trading since last week, with Sundance expecting to lift the suspension by April 8.

Sundance has been talking to other parties about ways to develop Mbalam, but has not said who might be in the running.

"Those discussions have been occurring and will continue to occur. All those discussions are confidential and incomplete," Casello said.

($1 = 0.9568 Australian dollars)

(Additional reporting by Wan Xu in BEIJING; Editing by Paul Tait and Stephen Coates)

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