It’s only a tiddler of a deal, but the merger announced yesterday between Aurox Resources and Atlas Iron set off a dramatic share price surge for one of the partners.
Aurox Resources shares jumped by more than 170% when trading resumed yesterday in both shares after the proposed merger was revealed.
Aurox shares finished up 172%, or 46.5c to 73.6c.
Atlas shares were not as enthusiastically supported, they eased, but then rose in afternoon trading, ending up 10c at $2.31.
Aurox traded at 27 cents when a trading halt was called earlier this week, Atlas at $2.21 before its halt on Monday.
The reason for the soaring share price for Aurox isn’t hard to see: Aurox shareholders will receive one Atlas share for every three Aurox shares.
The merger implies a price for each Aurox share of 74 cents based on Atlas’ last closing price of $2.21, representing a premium of 173%.
No wonder the Aurox board "unanimously recommends Aurox shareholders vote in favour of the merger in the absence of a superior proposal," Aurox said.
The Aurox board said that its members intend to vote in favour of the scheme in relation to their own holdings in Aurox, in the absence of a superior proposal.
Aurox said a merger would enable Aurox shareholders to participate in Atlas’ rapidly-growing production profile, which would position the company as a globally-significant iron ore producer.
Aurox shareholders would retain exposure to the Balla Balla project and also gain exposure to a large portfolio of "quality" iron ore projects throughout the Pilbara.
Aurox managing director Charles Schaus said the proposed merger was an outstanding opportunity for the Aurox shareholders to join with and participate in an impressive diversified iron ore growth company.
"It reflects the high potential of the Balla Balla project, Aurox’s access to infrastructure and regionally significant water resource.
"The merged groups port capacity of up to 33mtpa (million tonnes per annum) will allow the company to generate substantial synergies from production and development schedule optimisation.
"With iron ore prices expected to increase significantly in the coming year, this merger will give Aurox shareholders the opportunity to share in the benefits from immediate cashflows."
Atlas CEO, was just as enthusiastic, saying in a statement "This merger creates one company with an outstanding rapidly growing production profile supported by port capacity in one of the world’s greatest bulk export ports.”
The merged company will have 187mt of DSO resources, exploration targets of 430 to 750 million tonnes at 57% to 60% Fe, two Pilbara magnetite projects and a 15,000 square kilometre, Pilbara landholding, and a production target of 26 million tonnes a year by 2014.
Atlas says it is currently mining and exporting from its 100%-owned Pardoo Iron Ore Project, located 75 kilometres by road from Port Hedland in the Pilbara region of Western Australia.
In addition, Atlas says it is progressing development at its Wodgina and Abydos Projects.
"When combined with additional export tonnages from its Wodgina and Abydos Projects, Atlas is targeting exports at an annualised rate of 6 million tonnes in 2010, growing to 12 million tonnes by 2012," Atlas said.
"The merged company will offer investors a substantial growth profile with a pipeline of assets and opportunities," the companies said.;
They said in a statement that "shareholders in Aurox will benefit from owning securities in an ASX200 company with strong trading liquidity; and they will own shares in a company run by a world-class management and technical team with access to a robust balance sheet."
The proposed merger is subject to court and regulatory approval, approval from Aurox shareholders, and endorsement from an independent expert.
As part of the scheme implementation agreement, Atlas has agreed to extend an unsecured, interest-bearing loan of up to $7.7 million to Aurox to enable Aurox to redeem outstanding convertible notes that are due to mature on June 30, 2010.
Aurox shareholders will be asked to approve the scheme at meetings expected to be held in late May, 2010.
