Thought this article may interest some. Signals a delay in not only the ACCC findings regarding the BHP/RIO merger but BRMs ability to negotiate rail haulage with BHP. We know BHP wont come to the party unless they are forced. Unfortunately BRM is running out of time. I have no doubt BHP are aware that. If the negotiation process is held up for 6 months BRM and FRS will most likely be forced to negotiate an alternative.
In regards to SP, from a LT holders point of view I dont care. BRM has always been a spec play based on beneficiation and rail/port. The final beneficiation results this year (although a long time coming) were impressive. I believe far better than most people expected. TICK! Port through the NWIOA is progressing with the current DFS. TICK! As for rail, we wait and hope. A market capital of around $400-$500m for a company with no confirmed transport to get their product to port is exceptional in my eyes.
The factors for this are many. The factors are company based as well as industry based. This weeks growth figures in China continue to impress and IO consumption continues to increase. This places BRM in a strong bargaining position if WR can finalise a rail deal. Dont forget Marillana is a huge project, low strip ratio (latest .8:1 Wow) and forecast NPAT of around $400m.
With rail the last major hurdle for WR I remain confident he will get a deal done. If thats the case, a drifting SP over $3 shouldnt be a concern for any LT holder.
The Age - BHP, Rio get more time April 17, 2010
AUSTRALIA'S competition regulator has suspended its review schedule for the proposed Rio Tinto and BHP Billiton iron ore joint venture to give the companies more time to respond to questions.
The Australian Competition and Consumer Commission said yesterday the suspension would allow the companies time to answer a request for more information made on March 30. The ACCC was supposed to announce its findings on May 27.
Rio and BHP, the world's second-largest and third-largest iron ore exporters, plan to combine mines, railways, ports and workforces in Western Australia's Pilbara region in a 50:50 joint venture to save at least $10 billion. Steel makers in Europe and Asia oppose the deal.
The ACCC said last month it would study whether the venture and Rio de Janeiro-based Vale, the largest iron ore exporter, would have more ability to co-ordinate supply decisions.
South Korea's competition regulator plans to complete a review of the proposal in the second half of the year.
BRM Price at posting:
$3.72 Sentiment: None Disclosure: Held
