today's afr, page-2

Russia’s Magnitogorsk Iron and Steel (MMK) has failed in its initial attempt to have an injunction lifted that is preventing it from proceeding with a $558 million takeover of West Australian iron ore explorer Flinders Mines .
Flinders shares fell 3.8¢ to 18.2¢ yesterday after the company told the market that MMK’s motion seeking a discharge of the injunctive relief had been dismissed by the Arbitration Court of Russia’s Chelyabinsk region.
Minority MMK shareholder Elena Egorova obtained the relief earlier this month after she took her concerns over the Flinders deal to the court.
All, however, is not lost for MMK and the Flinders board, which has recommended the bid in the absence of a superior proposal.
The decision on the injunction was made only after a preliminary hearing and, according to observers, was not a surprise.
A full hearing of the appeal is expected to be scheduled by the end of the month.
Flinders said that, by its best estimate, a judgement should be delivered before its scheme implementation agreement with MMK expires on July 21.
While MMK is pursuing its appeal, Flinders, on independent legal advice, has also filed an appeal in Russia’s Appellate Court.
A spokesman for Flinders was unable to explain the reasoning for the separate appeals yesterday.
Since Ms Egorova secured the injunction at the start of the month, there has been much speculation that she may have had an ulterior motive.
But Flinders said senior MMK executives had been unable to confirm anything other than what was stated: that she opposed the deal on the grounds that it would cause unacceptable financial and operational risks for MMK shareholders.
Among the rumours were that Ms Egorova, who owns 0.001 per cent of MMK, has been acting on behalf of Kazakh miner Eurasian Natural Resources Corporation.
MMK purchased all of its iron ore pellets from ENRC last year, but the two parties had a falling out over an alleged breach of contract.
ENRC had been seeking compensation from MMK until February, when they were able to agree to a new iron ore supply deal for 2012.
There have also been suggestions that MMK is having trouble financing the deal and has created the legal imbroglio as a stalling tactic or way out.
But Flinders said yesterday that MMK had secured the finance and that it wasn’t a condition precedent to the completion of the scheme agreement anyway.
The Australian company also stressed that MMK was not looking to renegotiate terms and said it had not received any alternative offers.
It is understood that several large iron ore miners and a number of Chinese parties went through the Flinders data room before MMK made its bid in late November.
The Australian Financial Review