posco backs sale (deal likely to go through)

POSCO backs Oakajee sale

Published 9:48 AM, 24 Nov 2011 Last update 5:00 PM, 24 Nov 2011
By a staff reporter, with AAP

POSCO has backed Mitsubishi Development's move to buy Murchison Metals Ltd's stake in the Oakajee and Crosslands port and rail projects, according to reports.

Reuters Media said that South Korean steel giant POSCO, a substantial shareholder in Murchison, had unanimously supported its move to sell its stake in the projects, one of necessary approvals for the deal to go ahead.

Murchison Metals Ltd earlier struck a $325 million deal with joint-venture partner Mitsubishi Development over the sale of its stake in the Oakajee and Crosslands projects.

Shares in the miner skyrocketed on the news, surging 52.72 per cent to close at 42 cents, against a bench mark index fall of 0.16 per cent.

More than 18 million shares had changed hands, making it the tenth most traded stock by volume on the Australian sharemarket.

Mitsubishi's offer has an implied value per share of 51 cents per share, which represents an 85 per cent premium on Murchison’s last closing price of 27.5 cents.

Murchison shareholders will vote on the sale in February 2012, in the absence of a superior proposal.

"Under the terms of the transaction, Murchison is free to continue to seek superior proposals up until the time that Murchison shareholders vote on the transaction," the group said in a statement.

As part of the deal, the miner has agreed to continue funding both projects through to completion.

Murchison managing director Greg Martin said that the company had been testing third party interest in Murchison and its assets over recent months, and felt the sale was in the best interests of its shareholders.

“The Murchison team has worked extremely hard to unlock value for its shareholders in recent months, and it is our view that the transaction represents a solid outcome in very challenging circumstances," he said.

"Mitsubishi has put forward an offer that represents a good financial result for Murchison shareholders, although we will also continue to pursue discussions with other parties to give shareholders comfort this is the best option available.”

Should the sale go ahead, Murchison will use the funds to pay all of its outstanding debts and other obligations.

Murchison is a joint venture partner with Mitsubishi in the project, providing rail lines and a port at Oakajee, just north of Geraldton, to ship out the iron ore reserves of Western Australia's mid west region.

"The board will be considering its options as to the future of Murchison following completion of the transaction," the company said.

Murchison shares were 76.5 cents on June 27, when the group conceded it couldn't afford to pay for its 50 per cent share of the Oakajee project and had begun talks with Chinese parties about their possible participation.

Murchison shares nudged $6 in mid-2007 at the height of the mining boom.

Murchison is now left pondering its future, given the deal leaves it with two iron ore exploration projects, Rocklea in the Pilbara region and Weld Range in the Mid West.

The deal will also deliver the Japanese trading house full control of their Jack Hills iron ore mine in Western Australia's Mid West region, where the joint venture has been planning an expansion.

The plan to build a new iron ore port at Oakajee came about as nearby Geraldton port became congested and interest in the Mid West's iron ore projects grew.

The Mid West came into focus after land in the state's main iron ore mining region, the Pilbara, became tightly held amid high prices for the steel making commodity.

http://www.businessspectator.com.au/bs.nsf/Article/Murchison-sells-Oakajee-stake-pd20111124-NVUN2?OpenDocument&src=hp1