Atlas Iron next target

CONSOLIDATION appears to have arrived in the iron ore sector, and Atlas Iron has been nominated as the next target.
The $260m takeover of Iron Ore Holdings by BC Iron, coupled with the $1.4bn buyout of Aquila by China’s Baosteel and Aurizon, has shown there remains an appetite for deals despite the cooling iron ore price.
Atlas chief Ken Brinsden drew parallels between the Aquila deal and his company at the Diggers & Dealers forum in Kalgoorlie last week. He noted the lofty price paid by Baosteel and Aurizon gave them a broadly similar amount of production upside to that within Atlas’s portfolio, without the 12 million tonnes of production capacity already in place at Atlas.
Both Aquila and Iron Ore Holdings require capital investment to reach their production potential and were being heavily discounted by the market. Similarly, there’s little value being attributed to Atlas’s medium-to-long term growth prospects.
Fosters Stockbroking nominated Atlas as the next company likely to come on the radar of predators, noting that the likes of Fortescue Metals and Gina Rinehart’s Hancock Prospecting have — or will have — their own rail infrastructure that could unlock the growth potential in the Atlas portfolio.
More broadly, the X2 Resources fund of former Xstrata chief Mick Davis, Anglo American or Glencore could be among the groups looking at Atlas as a possible beachhead in the Pilbara.

The Australian..14/08/14