Aquila's Pilbara partner closes on sale

Indicative bids for a strategic 50 per cent holding in Aquila Resources $4 billion West Pilbara iron ore project are expected within two weeks, following a decision by Aquila's estranged joint venture partner to canvass offers for its stake.

Private carbon steel materials group AMCI Holdings formally launched a sales process for its half stake in the Australian Premium Iron (API) joint venture with Aquila last month, when its adviser UBS issued a detailed Information Memorandum to prospective bidders.

The highly confidential document requires indicative bids to be lodged with UBS within two weeks.

Shortlisted parties will then have another 4-6 weeks to lodge secondary offers before AMCI and UBS begin formal negotiations with the preferred bidder, potentially paving the way for a sale to be completed by the final quarter of 2009. However, some industry insiders believe AMCI may just be testing the market to determine the true market value of its API interest.

Sources close to the sales process said there had been strong interest in AMCI's holding in the API joint venture from "the usual suspects", including several Chinese iron ore customers such Wuhan Iron & Steel and CITIC Group.

Both were previously outed as potential bidders when AMCI engaged UBS to review the options for its API interest in mid 2008.

AMCI, which is controlled by German-born coal baron Hans Mende, has been at loggerheads with Aquila over a range of issues since 2007, when Aquila unsuccessfully argued a sale of AMCI's holdings in a Queensland coal joint venture triggered its own pre-emptive rights to re-acquire the stake. It is understood that Aquila also holds pre-emptive rights over AMCI's holding in the API joint venture.

Earlier this month, the Queensland Supreme Court dismissed AMCI's claim that dispute resolution clauses in the API joint venture agreement were unenforceable.

Aquila General Manager Iron Ore, Russell Tipper said neither he nor Aquila had seen any Information Memorandum, but were aware of rumours that such a document was circulating.

"That's what we have heard," he said. "But we are not aware of what the process is."

News of the bidding deadline for AMCI's Pilbara holdings came as Aquila announced it had singed a co-operation agreement with Fortescue Metals Group to study a joint development of a new iron ore port at Anketell Point near Wickham.

Aquila's West Pilbara Iron Ore Project is ultimately projected to produce 30 million tonnes of iron ore per annum from current Channel Iron resources estimated at 650 million tonnes. Fortescue is also looking to develop its Solomon deposits nearby to Aquila's tenements.