BCI (ASX) chinese may bid for bc iron

another view.

Cheers
Hotlegs

Chinese may bid for BC Iron Mathew Murphy
January 20, 2011

CHINA could be about to make a $300 million-plus play for a slice of Australia's iron ore market, with Hong Kong-based Regent Pacific Group and Pilbara-focused BC Iron entering trading halts before an expected announcement today.

Regent Pacific, a diversified mining group focused largely on copper, zinc and coal in the Asia-Pacific region, has been creeping up the share register of BC Iron, having bought 2 million shares in November, or slightly more than 4 per cent of the company, to take its shareholding to 19.87 per cent. That is just shy of the 20 per cent takeover threshold.

Before yesterday's trading halt, BC Iron stood as a $293 million company, expected to produce 5 million tonnes a year of iron ore by 2013 at its 50-50 Nullagine joint venture with Fortescue Metals Group.

Advertisement: Story continues below Its second-largest shareholder, Regent Pacific, told the Hong Kong Stock Exchange a trading halt to its shares was needed ''pending the publication by the company of an announcement in relation to a very substantial acquisition''.

Analysts pointed to recent sales by Regent Pacific, including parting with its interest in the Zhun Dong coal project for $US74.3 million and selling its stake in the Dapingzhang copper-zinc mine for $US63.18 million.

''Both transactions were completed in the fourth quarter of 2010, and the unaudited gains from these disposals were $US19.83 million,'' the company said.

In the update a week ago, Regent Pacific said its total cash position was $US123.6 million.

Any deal between the pair would be a litmus test of the Foreign Investment Review Board's attitude to China buying into Australian iron ore.

E.L. & C. Baillieu analyst Adrian Prendergast said Regent Pacific was a more likely suitor for BC Iron than the company's joint-venture partner, Fortescue Metals Group, which had been talked about as the potential acquirer.

''Adding another 2.5 million tonnes per annum through acquiring BC Iron would seem small fish for FMG, who is targeting another 300-400 million tonnes per annum of production,'' he said. ''Then again, it would be an easy increase with the project already in operation. If it is FMG, the price bid will tell us how capex [capital spending] is travelling in the region.

''The trading halt could be related to BC Iron's second-largest shareholder, Regent Pacific, who could be seeking a larger stake or levelling a bid itself for the business. If so, again the price paid would be of interest to us.''

Fortescue did not enter a trading halt yesterday and lost some of its gains from Tuesday when an impressive production report raised the share price by 8 per cent. The shares yesterday fell 8?, or 1.1 per cent, to $7.19. The joint venture between BC Iron and Fortescue could complicate any moves by Regent Pacific to acquire the junior miner.

BC Iron and Regent Pacific refused to comment.