July 17 (Bloomberg) -- Evraz Group SA, the steelmaker partly owned by Russian billionaire Roman Abramovich, bought a 16 percent stake in Australian iron-ore company Cape Lambert Iron Ore Ltd., potentially derailing a bid to sell the company's mine to China.
``It is Evraz'' that bought the holding, Tony Sage, a director in Perth-based Cape Lambert, said today by phone from Singapore. ``At this stage, there has been no discussion of a bid or the price of a bid.''
Global steelmakers are seeking to secure raw-material supplies including coal and iron to help cut costs as prices surge. Cape Lambert agreed in February to sell its iron-ore project to China Metallurgical Group Corp. for A$400 million ($391 million).
``Evraz is building a global business, and their strategic objective is to'' meet all their own iron-ore needs, said Michael Kavanagh, an analyst with UralSib Financial Corp. in Moscow. ``One would imagine they'd go for a full takeover. It's a first step into Australia.''
Cape Lambert, which had disclosed the stake purchase yesterday without identifying the buyer, gained 4.25 pence, or 13 percent, to close at 38.25 pence in London trading. Earlier the stock jumped 6.5 Australian cents, or 8.9 percent, to close at a record 79.5 cents on the Australian stock exchange, valuing the company at A$257 million.
Cape Lambert's board met today with representatives of Evraz and Merrill Lynch & Co. in Singapore, and the talks may lead to a takeover offer, Sage said earlier by phone. The board will not accept an offer less than A$1.20 a share, he said.
Second-Richest Man
Abramovich is Russia's second-richest man with a fortune valued by Forbes at $24.3 billion and is also the owner of the Chelsea soccer club. John Mann, a Moscow-based spokesman for Millhouse LLC, the company that manages Abramovich's assets, declined to comment. Tatyana Drachuk, a spokeswoman for Moscow- based Evraz, was not immediately available to comment.
Evraz ``wanted to know, if they had the company, how much it would cost to develop the project, that is obviously their biggest concern,'' Sage said of today's meeting. ``They are considering numerous options.''
Cape Lambert's proposed mine sale to China Metallurgical has received all necessary approvals from Australian regulators and China's government, with Cape Lambert's shareholders set to vote on the sale on July 28. The project may produce about 7 million metric tons of ore a year from late 2009.
Building Boom
Prices for steelmaking raw materials such as iron ore and coking coal have leapt to records this year on rising demand for steel to fuel building booms in emerging economies such as China. Iron ore has gained almost fourfold since 2001 and contract prices for some ore rose as much as 97 percent this year.
``The world is short of high-quality iron ore,'' John Veldhuizen, a resources analyst at BBY Ltd., said by phone from Sydney. ``There's going to be more and more of these steel companies going to be trying to lock in that supply.''
An earlier sale of the Cape Lambert project to Chinese investor Ding Liguo, chairman of Singapore-based steelmaker Delong Holdings Ltd., collapsed last October. Ding had agreed to buy a 70 percent stake for about A$240 million.
Evraz said Feb. 19 that it will buy 10 percent of Delong and may raise that in time to 51 percent. Delong owns 3 percent of Cape Lambert, effectively giving Evraz control of 19 percent of the Australian company, UralSib's Kavanagh wrote today in a note.
To contact the reporters on this story: Jesse Riseborough in Melbourne at [email protected]; Yuriy Humber in Moscow at [email protected]
Last Updated: July 17, 2008 13:20 EDT
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