25/09/2008 - 11:49

Chinese to take major stake in Grange

25/09/2008 - 11:49

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Private Chinese company Shagang International Holdings will emerge with a 45 per cent stake in Grange Resources Ltd as a result of a merger deal announced today between Grange and Australian Bulk Minerals.

Private Chinese company Shagang International Holdings will emerge with a 45 per cent stake in Grange Resources Ltd as a result of a merger deal announced today between Grange and Australian Bulk Minerals.

The all-scrip merger will combine Grange's Southdown magnetite project near Albany with ABM's 2.3 million tonne per year Savage River magnetite and pellet operation in Tasmania.

Grange is offering 380 million of its shares to buy ABM from owners Shagang International - a subsidiary of large Chinese steel producer Jiangsu Shagang Group Co. - RGL Holdings, Pacific International and Stemcor Pellets.

While Grange will have 26.1 per cent in the merged company - which will remain trading as Grange Resources - Shagang will take 45.3 per cent ownership, RGL 13.3 per cent, Pacific 8 per cent, and Stemcor 7.4 per cent.

Grange managing director Russell Clark said he was confident the deal would go ahead because the company was dealing with a private entity and not a Chinese government-backed company.

"I think that will be looked upon favourably," he said.

Grange had been looking for a joint venture partner for its Southdown project for two years. Mr Clark said while a number of parties had shown interest in the project, merging with ABM would be a "marriage made in heaven".

"Our balance sheet will be enhanced by the merger," he said.

The merger is projected to generate up to $90 million before interest, tax, depreciation and amortisation, for the second half of this year.

Through the transaction, Grange will also acquire the balance sheet of ABM as at June 30 this year, which included net debt of about $80 million and deferred acquisition payments and royalties with a current estimated gross value of about $350 million, payable up to 2022.

 

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