11/08/2014 - 09:19

BC Iron swoops on Iron Ore Holdings

11/08/2014 - 09:19

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BC Iron has launched a $256 million takeover bid for Kerry Stokes-backed iron ore play, Iron Ore Holdings.

BC Iron swoops on Iron Ore Holdings
IOH managing director Alwyn Vorster.

BC Iron has launched a $256 million takeover bid for Kerry Stokes-backed iron ore play, Iron Ore Holdings.

BC announced this morning it would offer 0.44 of its shares plus 10 cents in cash for each Iron Ore Holdings share.

The deal would result in the creation of a mid-cap iron ore miner with around $190 million in cash, as well as two operating mines in the Pilbara – the Nullagine joint venture and Iron Valley.

The offer values IOH at $1.59 per share.

IOH is developing the $744 million Iron Valley mine in the Pilbara, which is expected to produce 8 million tonnes of ore each year once production starts in the coming months.

The deal comes less than a week after BC Iron managing director Morgan Ball said there was still potential to expand his company's operations in the Pilbara.

It expects its Nullagine joint venture project to produce 6mt of iron ore per annum over the next six years.

"BC Iron has looked closely at a large number of potential growth opportunities over an extended period, and we believe that, combined with our existing business, IOH's portfolio of long-life iron ore assets in the world's best iron ore address presents us with an excellent opportunity to create meaningful and sustained long-term value for our shareholders," Mr Ball said.

“We’re trading 35 per cent of the short mine-life operating Nullagine mine for 65 per cent of two potential 20-year mine life operations - Iron Valley, which is close to production and being operated by Mineral Resources, and Buckland, located in the West Pilbara, which Iron Ore Holdings has released a feasibility study on.”

IOH said that it had been advised by its major shareholders, Australian Capital Equity, that it intended to accept the offer within 14 business days of the offer opening, in the absence of a superior proposal.

If the offer is successful, IOH would become a wholly-owned subsidiary of BC Iron, with IOH shareholders to own about 36.6 per cent of the combined group.

ACE would own about 19 per cent. 

"After BC Iron both acquires a relevant interest in 50.1 per cent of IOH and the offer becomes unconditional, existing IOH non-executive director Brian O'Donnell and IOH managing director Alwyn Vorster will be invited to join the BC Iron board, which will continue to be chaired by Tony Kiernan," BC said in a statement. 

Mr Ball will retain his role as managing director of BC Iron, while Mr Vorster will be offered a term advisory contract, with a focus on marketing, funding and business development of the Buckland project.

After the offer is completed, BC Iron said it would advance financing solutions required to make the Buckland project development ready as soon as possible.

"The combination of the two companies will generate strong technical and commercial synergies, with significant longer-term value benefits for all IOH shareholders from the IOH assets," Mr Vorster said.

"The transaction structure also supports greater funding and development optionality for the Buckland project, with its road and port components potentially opening up the West Pilbara to other parties."

BC Iron's share price fell by 4.53 per cent to $3.16 per share at 11:50am.

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