mmx should cast an eye over gwr, page-6

MIDWEST'S chief executive, Bryan Oliver, has conceded it makes sense to merge with Murchison Metals but insists the timing and price are not right.

Murchison last month made a $1 billion hostile scrip offer for Midwest, which has neighbouring iron ore projects in Western Australia's mid-west region. Murchison's offer of one share for 1.08 Midwest shares means the target would represent only 31 per cent of the merged company.

Midwest has so far proven more hematite resources than Murchison, but it has a less ambitious production target of 15 million tonnes a year from its second-stage Weld Range project. Murchison aims to produce 25 million tonnes a year from its second-stage Jack Hills project in a joint venture with Mitsubishi.

Both companies are working hard to prove enough resources to underwrite their projects, given a $3 billion investment in regional port and rail infrastructure is needed for either to proceed.

"A better timing for any deal would be in six months when we understand what resources we've got and are properly valued in the market according to those resources," Mr Oliver said.

He noted the top 20 Midwest shareholders held 74 per cent of the stock, adding that many were long-term investors who were willing to wait until a more balanced merger could be achieved.

Midwest produced charts showing it would now have 71 per cent of the hematite resources of the merged Midwest-Murchison. Murchison expects to release a more definitive resource estimate in the first quarter next year and Midwest will release its pre-feasibility study in the third quarter next year after conducting more drilling.

When asked whether Midwest would accept Murchison's offer if its shareholders owned half of the combined company, Mr Oliver said: "It would certainly have to be considered seriously."