chinese make a grab for brm

Today's Australian

Chinese make a grab for Pilbara's Brockman Resources

BROCKMAN Resources is the latest Pilbara iron ore hopeful to be flagged as a potential takeover target after a Chinese investor this week increased its shareholding to 19.9 per cent.

The Perth company has interested investors since it announced last month a 133 per cent increase in measured and indicated resources for its flagship Marillana project.

Hong Kong investment group Wah Nam International Holdings has purchased about $27.4 million worth of Brockman's stock on market since the upgrade, representing about 64 per cent of total traded volume over this period.

The group has now increased its stake to the takeover threshold of 19.9 per cent in the iron ore junior, becoming the largest shareholder in the company.

Ocean Equities London broker Sam Spring said Wah Nam had already done extremely well on its investment in Brockman, sitting on an unrealised profit of $37m, but there was a question around the investment group's end game.

"Are they seeking to acquire control of Brockman, are they potentially interested in using this investment as an initial entry point into a larger regional play, or indeed, are they strictly a speculative financial investor taking a punt on Brockman being able to secure third-party infrastructure access," he said in a report on the stock.

"Their position in Brockman is now worth $86m and the Pilbara iron ore sector continues to be the focus of significant strategic investment.

"A Hong Kong investment group investing $27.4m on-market in less than a month is an extremely significant vote of confidence in the underlying Marillana project and Brockman's ability to secure the required third party infrastructure access to unlock the value of the project."

Media mogul Kerry Stokes' Iron Ore Holdings has also been tipped as a takeover target in the Pilbara sector.

IOH, in which Mr Stokes has a 53 per cent stake, last year entered an exclusive agreement with Rio for the major to examine IOH's Iron Valley deposit, which might lead to the purchase of part or all of the lease covering the deposit.

Mr Spring said an on-market bid for Brockman, an annual iron ore contract settlement beyond 30-40 per cent, and third-party rail access, were all achievable in the near-term.

"In our view they would all be extremely positive catalysts for the Pilbara iron ore sector," he said.

The result could be a full takeover of the emerging miner, Mr Spring said.