Fresh from being overbid for control of small WA oil and gas group, AWE, the acquisitive Mineral Resources seems to have quickly found another target for its affections – the on – off again iron ore miner and exporter, Atlas Iron.
Hours after a media article suggest Atlas was now in the sights of MinRes CEO Chris Ellison, the shares of both companies were placed in a trading halt on the ASX yesterday.
Atlas shares last changed hands for 1.9 cents, valuing it at $176 million while MinRes’ last traded price was $17.24, giving it a value of $3.2 billion.
The deal isn’t just an attempt by MinRes to make a late entry into the Pilbara iron ore industry (it has been frustrated in the midwest of WA in magnetite, not Pilbara type haematite ores).
A bid for Atlas would allow MinRes to expand its iron ore and lithium involvement in the Pilbara, but more importantly give its access to the iron ore miner’s 13 million tonnes a year port capacity allocation at Port Hedland’s Utah Point bulk export facility.
Min Res has been looking to expand its Pilbara lithium and iron ore operations but needs more port capacity to achieve its growth ambitions while media reports suggest that Atlas has been finding it tougher in recent months to get a return on its low-grade ore given the big growing discounts it has been forced to accept from Chinese buyers who prefer the 62% type ore from BHP and Rio Tinto. Fortescue is in the same boat as Atlas with its 58% ores.
Atlas has also focused on exporting lump ore, rather than fines 9which are preferred by Chinese buyers. Lump is preferred in japan). ATlas though has to truck its ore to Por Hedland (BHP Rio and FMG rail their ore).
In March Atlas announced plans to sell up to 1.5 million tonnes of raw lithium ore sourced from Pilbara Minerals’ Pilgangoora project to China’s Sinosteel in a bid to diversify its operations and help meet it port capacity allocation at Utah Point.
It also revealed plans to move 100,000 tonnes of manganese ore to be mined and crushed on a campaign basis by privately-owned Horseshoe Manganese through Utah Point.
One of Atlas’ Utah Point lease agreements with the State Government is due to expire on September 17 and will need to be renegotiated.
A deal with MinRes would probably improve the chances of that lease being renewed.
