article in the australian 30th august

Couldn't see that this article has already been posted, but would be interested in anyone else's thoughts and comments. A few interesting scenarios possible here for consolidation etc. Not too sure what they meant by "given that FerrAus's assets are no use to Atlas" if someone could explain please.

http://www.theaustralian.com.au/business/opinion/rail-operators-profit-does-little-to-quell-critics/story-e6frg9lx-1226124858576

Wah Nam blow

FERRAUS shareholders yesterday dealt Hong Kong limo-operator-turned-iron-ore-junior Wah Nam a serious blow by endorsing the really quite sensible plan to tie the Australian junior's fate to a real live iron ore producer, Atlas Iron. But only just.

For a deal laced in as much strategic logic as necessary complexity, the FerrAus vote was a perilously close run thing, given 41 per cent of shareholders voted against a key component of the deal, which involved the placement of FerrAus.

Just to remind you, this is a three-step deal that involves FerrAus issuing Atlas 37 million shares at 65c, then FerrAus buying Atlas's Pilbara iron ore assets for 159.2 million shares and then Atlas acquiring FerrAus in a one-for-four offer. Now, given Wah Nam owns 16 per cent of FerrAus and had launched a takeover in the hope of adding its reserves to Brockman Resource, which it took control of earlier this year, its inclusion among on the no-side of the equation was no surprise.

But the same could not be said for the negatives registered by China Railway Materials Commercial and China West Mining, which together speak for better than 16 per cent of FerrAus.

China Railway's decision to vote against part B of the FerrAus proposal was, in particular, a huge shock, if only because the Chinese investor boasts a nominee on the Australian junior's board.

It is understood that Guoping Liu had consistently expressed support for the deal during boardroom consideration, but that view was not reflected in the proxies. Which would seem to leave China Railway's nominee in a pretty delicate spot.

Then again, just to top off this afternoon of inscrutability, pretty much as soon as the numbers fell the way of FerrAus and Atlas, China Railway released a statement saying it would support the transaction pending a better offer.

Given that indication of support translates into reality, China Railway's support will tip Atlas over its minimum acceptance condition of 50.1 per cent.

Whether that results in mainland China being embedded in Atlas's expanded future, well, time will tell.

Certainly, given that FerrAus's assets are no use to Atlas, with a railway to link its prospects in the distant east of the Pilbara to its allocated port space at Port Hedland, China Railway might have something quite tangible to offer here.

Then again, given Atlas will emerge from this deal with much more potential for a step-change in production, China Inc might well have other things in mind.

Options and plan Bs are also now the name of the game for Wah Nam. It has assumed control of Brockman, but its resources, while much closer to the coast than anything FerrAus has, also require access to a railway. And few reckon Brockman alone can provide the core production that justifies stand-alone investment in a link.

The name of the game now for Wah Nam is to leverage what it does have into a profitable exit strategy or an entry fee for a new game of consolidation.