Asia Resource stock rises on possible bid from Argyle Street

For a company mining an unloved product in a difficult environment, and facing a large bond repayment, Asia Resource Minerals is suddenly getting a lot of interest.

Stock in the Indonesia-focused coalminer once known as Bumi rose more than 70 per cent on Wednesday after one shareholder - Argyle Street Management, an Asian investor - announced it and a partner were considering a possible 41p per share offer for the UK-listed company. The overture comes days before Asia Resource's shareholders are due to vote on a separate equity-raising and refinancing deal underwritten by financier Nat Rothschild, co-creator of what has been a troubled venture.

The deal being backed by Mr Rothschild could lead to his controlling 61 per cent of the miner if no other shareholders take up the chance of new stock. Argyle wants other shareholders in Asia Resource to vote against Mr Rothschild's plan, calling it an opportunistic attempt to gain control, and says it is offering a better deal.

The competing proposals are the latest of many skirmishes over Asia Resource. The miner was founded as Bumi by Mr Rothschild and Indonesia's Bakrie family, who fell out over the company's governance. Samin Tan, another Indonesian investor who took over the Bakrie's remaining stake last year, has also been at loggerheads with Mr Rothschild but still controls almost 24 per cent of the miner.

The market capitalisation of the coalminer, which once harboured dreams of blue-chip status, has sunk to barely £40m and its leadership has come and gone via a revolving door.

A $450m bond issued by the group's Indonesian subsidiary is due in July, and both Mr Rothschild and Argyle Street say they want to get Asia Resource through this urgent refinancing - through extending maturities and partial repayment - so they can focus on operational improvements.

Argyle is also proposing an offer to raise equity to support the refinancing, at a price of 28p compared with the 25p proposal underwritten by Mr Rothschild that is being voted on Wednesday next week.

While Mr Rothschild thinks Asia Resource has the right leadership, Argyle Street contends the company will continue to struggle in Indonesia without a strong business partner.

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The fund's offer for Asia Resource would be backed by Indonesia's wealthy Widjaja family and their Sinarmas Group, one of Indonesia's largest conglomerates.

Asia Resource's shares were trading at 25p by late afternoon on Wednesday, suggesting some investors were sceptical about the offer by Argyle Street and its partners.

Argyle's intervention is not "anti-Nat", Mr Chan says. "We are a financial investor, we care about value . . . I am not optimistic about the operational side or the political and legal side going forward. We would like a partner capable of creating value."

He says Argyle's holding of 4.7 per cent in Asia Resource has cost about £1.80 per share, compared with a share price of 15p before its proposal being announced.

Mr Rothschild already controls about 18 per cent of Asia Resource. A decisive role in next week's vote could therefore be played by Austria's Raiffeisen Bank International, which lent to Mr Tan when he invested in Asia Resource and has now taken control of almost 24 per cent of voting rights from the businessman.

Raiffeisen did not immediately respond to a request for comment. Mr Rothschild is confident the bank will support his restructuring plan, which also has approval from some bondholders. Some equity investors also intend to stick with Mr Rothschild, who declined to comment.

Cato Stonex, fund manager at Taube Hodson Stonex, said: "Mr Rothschild's proposal is worth supporting because there is potential for a substantial recovery if we get better governance at the company."

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