Utah Point at Port Hedland.

BDO backs Atlas takeover

Monday, 16 July, 2018 - 15:52

Hancock Prospecting’s $390 million takeover bid for struggling iron ore miner Atlas Iron has been endorsed by independent expert BDO, which found the pricing was fair and reasonable.

Hancock subsidiary Redstone is offering 4.2 cents per share to Atlas shareholders.

BDO said the fair value of Atlas shares was between 1.5 cents and 4 cents, with a mid-point valuation of 2.3 cents.

BDO’s report was included in a target’s statement released today, in which the Atlas directors reiterated their support for the bid and painted a gloomy outlook for the loss-making miner.

Atlas incurred a statutory net loss of $21 million for the six months to December 2017 and since then its operating costs have exceeded its average selling price.

It attributed this outcome to the increasing price discount applied to its low-grade ore combined with higher operating costs from its Mr Webber mine.

Operations at Mr Webber are forecast to end in 2022 and the company said it was not in a position to fund the development of other assets such as Corunna Downs and McPhee Creek.

Chairman Eugene Davis said the Atlas board had conducted a detailed strategic review of its options, including debt refinancing, an equity raising and asset sales.

“Following that review and given ongoing difficult market conditions for low-grade iron ore, we believe that the Hancock offer is in the best interests of Atlas shareholders in the absence of a superior proposal,” he said.

Redstone currently holds 19.9 per cent of Atlas, with rival iron ore miner Fortescue Metals Group holding a similar stake.

Fortescue has not disclosed if it will accept the Redstone offer.

Mineral Resources had previously launched its own takeover bid but that lapsed after Redstone countered with a higher cash offer.

Atlas has been advised by Houlihan Lokey and DLA Piper.