Atlas eyes second takeover after Aurox
10/03/2010 7:53:16 PM
Cashed-up miner Atlas Iron Ltd is considering another acquisition in addition to its proposed $143 million takeover of junior iron ore explorer Aurox Resources Ltd.
"I would say there is a chance we would do another deal," Atlas managing director David Flanagan told AAP on Wednesday.
"But we're not on the rampage.
"We're not rushing out there to do heaps of deals.
"I know that there are other opportunities out there."
Aurox shareholders will receive one Atlas share for every three Aurox shares held, under the Aurox deal unveiled on Wednesday.
Atlas said in a statement the all-scrip deal valued Aurox at $143 million, a $90 million premium based on the target's market value on Monday, when it was placed in a trading halt.
Aurox shares soared when they emerged from the trading halt on Wednesday, closing 46.5 cents, or 172.22 per cent, higher at 73.5 cents.
Atlas shares gained 10 cents, or 4.52 per cent, to $2.31, pushing its market capitalisation beyond $1 billion.
Atlas is paying a healthy premium to gain Aurox's space at the Utah Point berth project under construction at Port Hedland in Western Australia.
Mr Flanagan said $250 million of savings could be achieved from the development of Atlas' Ridley magnetite project in WA if it is bundled with Aurox's nearby Balla Balla magnetite project.
Atlas is in talks to sell 70 per cent of Ridley.
Magnetite is a form of iron ore that requires processing, unlike direct shipping ore (DSO) that can be put straight onto a ship.
Savings would be made by building only one de-watering facility for the two projects, Mr Flanagan said.
"And if you were to blend Ridley and Balla Balla magnetite, there is a benefit in the price you would achieve (from customers).
"So just in those two items there, there is a capital saving of about $250 million."
Mr Flanagan said the deal was initiated by a mutual top 20 shareholder of Aurox and Atlas.
It comes a week after Aurox agreed to give Atlas first rights to use its port facilities to export DSO, but Atlas wanted full control of Aurox to prevent others using Aurox's port allocation for magnetite exports.
"We could actually see from the interest that we were getting in the Ridley magnetite, that probably our competitor was in fact planning to develop a magnetite project and use that ore to displace our ore.
"Our way to get full value was to bid for the company."
Aurox's port allocation is six million tonnes per annum (mtpa), rising to 10mtpa from 2015, but there is scope to increase this to 12mtpa.
Atlas plans to mine at a rate of 6mpta by December.
Mr Flanagan said Atlas was not waiting to complete the Aurox acquisition to finalise its Ridley sale.
He also said Atlas would remain reliant on Fortescue Metals Group Ltd's (FMG) port facilities until Utah Point was completed some time between July and October.
Thereafter, Atlas "wouldn't be seeking to use the FMG port as any serious plank in our capacity".
"There might be times where ... we can deliver some ore into their stockyard.
"If you look at our cashflows, we're not making a heck of money going through there.
"I don't contemplate any long-term baseload in there."
The Aurox board has unanimously recommended that its shareholders vote in favour of the deal at a meeting to be held in May.
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