bc iron could go from hunter to hunted

December 19, 2012, 12:13 PM
Australia’s BC Iron Could Go from Hunter to Hunted
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By Ross Kelly
Just days after playing predator, could mid-tier miner BC Iron Ltd. BCI.AU -2.63%be about to turn prey?

Regent Pacific, the company’s second-biggest investor with a 20% stake, this week asked its shareholders for permission to sell all or part of its interest in the Australian company over the next 12 months.

Hong Kong-based Regent Pacific likes to recycle the money it’s made from its various investments to pay for “strategic, controlling and operational interests” in mining companies and assets it reckons can add more value. It’s positioned itself for a selldown just days after BC Iron paid 190 million Australian dollars (US$200 million) to raise its stake in a Western Australian iron joint venture with Fortescue Metals Group to 75% from 50%.

“The directors are of the view that now is the right time to seek the disposal mandate given the value that has been created now that BC Iron has successfully negotiated a significant transaction with Fortescue,” Regent Pacific said in a statement. Its chief executive, Jamie Gibson, has stood down from BC Iron’s board.

A full sell down would put Ukranian billionaire Gennadiy Bogolyubov in the box seat at BC Iron, although it remains to be seen whether he’s ready to weigh more heavily into iron ore by raising his holding above the current 21%.

Mr. Bogolyubov’s Consolidated Minerals venture styles itself as a manganese miner with more passive iron ore investments. In an interview with Dow Jones Newswires last year, Mr. Bogolyubov said he was happy with his BC Iron stake as it was.

“I’m not in the iron ore business,” Mr. Bogolyubov said, while adding “my understanding is the company will grow and it’s got a lot of potential”.

And grow it has.

Despite the recent shakeup in iron prices caused be fears about China’s growth prospects, shares in BC Iron have rocketed to record highs, opening the way for it to raise additional capital from a discounted share issue to help pay for the deal with Fortescue.

Even with the discount, the shares are still up 25% this calendar year at A$3.32 each. That values the company at about A$400 million.

That means that anyone willing to pay a takeover premium would have to possess a particularly bullish view of the iron ore market to make a bid make sense.

The jury’s still out on whether prices have further to rise, although the balance of analysts’ views has generally been positive.

Prices of the key steelmaking ingredient have bounced by more than 50% since their year-to-date lows in September to sit at around US$130 per ton, still down on year-highs struck in April of around US$150.

Macquarie bank MQG.AU +2.77%analysts are forecasting a continued rise to around US$140 a ton in the first quarter of 2013, while UBS says UBSN.VX +1.87%2013 “seems to offer dramatic upside” for iron ore

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