SDL Sundance Resources Limited

Shares in Central Africa-focused iron ore developer Sundance Resources Ltd. (SDL.AU) soared as much as 28.8% Monday after Chinese investor Sichuan Hanlong Group announced a 1.44 billion Australia dollar (US$1.52 billion) offer for the company.

Sundance said Hanlong Mining Investment Pty. Ltd. had offered A$0.50 for each Sundance share through a scheme of arrangement, a 25% premium to the shares' close on Friday. Around A$1.1 million in shares traded above that price Monday morning at levels up to 51.5 Australian cents, suggesting that investors expect Hanlong may have to raise its offer, or that another buyer could join the fray. Hanlong already holds an 18.6% stake in the company, which it purchased in March from the investment vehicle of Sundance's late director Ken Talbot.

"The board considers that the terms of the offer do not provide adequate value or certainty to Sundance shareholders in respect to possible joint venture, financing and offtake arrangements," Sundance said in a statement. It added that it would continue to advance talks with strategic partners in the project.

Hanlong's managing director Xiao Hui said in a statement that he looks forward to discussing the deal further with Sundance.

The move from Hanlong emphasises a shift by Chinese investment groups away from direct investment in Australia.

Australia's opaque foreign investment approval process, rising cost pressures, and the introduction of new mining and carbon taxes over the past 18 months has been blamed for deterring overseas investment, although deals such as Peabody Energy Corp.'s (BTU) and ArcelorMittal's (MT) joint A$4.73 billion offer for Macarthur Coal Ltd. (MCC.AU) last week suggest that takeover appetites remain strong.

"With Australian projects facing headwinds in recent times, we believe West Africa presents investors with a new and attractive landscape to invest in iron ore projects," Foster Stockbroking said in a note.

Sundance hopes to produce 35 million tons a year of iron ore from its Mbalam project on the borders of Cameroon and the Republic of Congo, with construction due to start before the end of this year. Talbot and five other Sundance executives were visiting the remote project last year when they were killed in a light plane crash.

Sundance plans to keep ownership of Mbalam while bringing in funding and development partners from China. The company took several parties on a tour of the operations to finalise due diligence last month.

"Sundance has shortlisted the preferred potential partners and has entered into commercial negotiations," the company said in a 29 June update.

The project would involve construction of a 510 kilometer rail line and a port on the coast of Cameroon capable of handling 35 million tons a year. The entire two-stage project would cost US$7.79 billion in capital spending, Sundance estimates.

Sichuan Hanlong is a privately-owned group with interests in infrastructure and resources, mostly in China's southwestern Sichuan province.

The company last year took control of Australian molybdenum developer Moly Mines Ltd. (MOL.AU) and announced plans to become a "fourth force" in Australian iron ore mining, to rival Rio Tinto PLC (RIO), BHP Billiton Ltd. (BHP) and Fortescue Metals Group Ltd. (FMG.AU).

Last week it also unveiled a A$143 million bid for Namibia-focused uranium developer Bannerman Resources Ltd. (BMN.AU).

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com

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