Atlas / MinRes

Interested to hear thoughts on this.

Next! Chris Ellison's Mineral Resources back on the hunt

• street talk
  
• Apr 5 2018 at 12:15 AM
• Updated Apr 5 2018 at 12:15 AM

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MinRes boss Chris Ellison is on the lookout for fresh opportunities. supplied

• by
• Sarah Thompson
• Anthony Macdonald
• Joyce Moullakis

Fresh from missing out on listed oil and gas junior AWE, Chris Ellison's Mineral Resources is wasting little time scouting for its next target.

This time the Perth-based miner and contractor may be sticking more closely to its roots, with some pointing to Pilbara play Atlas Iron as having caught the Financial Review Rich Lister's eye.

While Street Talk is not suggesting a formal approach has been made to the board, Atlas Iron is well known to the MinRes board and management team, and could make sense strategically. And it's the sort of bolt-on deal that could gain support from MinRes investors, who know to expect the unexpected.

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Of course, Mineral Resources would've had plenty of chances to look at Atlas Iron in the past. The company has had its up and downs, and been seeking a white knight at various times.

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Any move on Atlas, capitalised at $186 million, might fit Ellison's reputation for acting opportunistically when the chance arises, given Atlas' financial position has been weakened by the same sort of discounting in lower iron ore grades that has plagued Fortescue Metals, only steeper in Atlas's case with its lower quality resource.

Atlas's first half net loss of $21.3 million was wider than some analysts had anticipated due to the grade issue as well as increased costs from haulage and lower volumes. It has been diversifying into manganese and lithium processing for third parties to improve use of its infrastructure, including its up to 13 million tonnes of port capacity at Utah Point at Port Hedland.

For MinRes, adding the Atlas assets may bolster Ellison's ambitions to build up an integrated mining and processing house, expanding its capacity at Utah Point. While the strategy behind an appetite for Atlas's iron ore remains less certain, one theory is that MinRes could use the resource in its new transport system.

Perhaps the tensions that arose between Ellison and former Atlas boss David Flanagan during the iron ore price slump in 2015 when Atlas's contractors were expected to take a haircut on margins are not standing in the way.

It comes as MinRes regroups after the three-way battle for AWE, now firmly in the clutches of Japan's Mitsui & Co which crossed the 50 per cent threshold for acceptances late Wednesday.

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AWE had earlier recommended Mineral Resources' bid, before it was trumped by Mitsui. Mitsui's $602 million takeover bid has been declared unconditional and will now be extended from Friday.

While most of the major shareholders are known to have accepted Mitsui's offer, Seven Group Holdings is still holding off as it seeks options to take operating control of AWE's key gas field Waitsia.