FURTHER consolidation is expected in the Pilbara region, with Atlas Iron mobilising a plan to cement its place as the fourth-largest iron ore miner through a $500 million alliance to be announced today.
The Australian understands that Warwick Resources, which is 20.88 per cent-owned by Atlas, and Hannans Reward are set to announce a deal that consolidates their iron ore projects in the East Pilbara.
Speculation of a deal began to build earlier this week when Atlas, which started shipping to China last year, announced plans to raise up to $116.7m to fund the expansion of its Pilbara operations in Western Australia.
Both Hannans and Warwick were placed in trading halts yesterday pending an announcement regarding a "mineral rights transaction".
It is understood the strategy is to make Warwick a major iron ore player with the acquisition of Hannans' Jigalong Project iron ore rights. Hannans is expected to become a major shareholder of Warwick. WA explorer Hannans' primary projects are the Forrestania Nickel project east of Perth and the Jigalong iron ore project in the Pilbara.
Last month, Pilbara-based minerals developer Fox Resources launched an aggressive $5.9m takeover bid for Hannans, which rejected it; the offer lapsed last week.
Fox had argued that combining the two organisations would make sense in the current economic climate, and would provide long-term benefits for the shareholders of both companies.
One analyst said it was strange that Hannans had rejected the Fox bid, arguing the synergies were not there, but was prepared to talk to Warwick.
The combined Hannans and Warwick projects would have about 225 million tonnes of direct shipping ore and a ground position of about 5000sqkm. Hannans will retain all manganese, gold, base metals and uranium rights within the Jigalong project.
It is understood that Atlas sees its stake in Warwick as a strategic position to help it spread its influence through the Pilbara.
Warwick is an emerging iron ore explorer with projects in Newman, near BHP Billiton's Jimblebar mine, but it is at the mercy of the mining giant, which has refused to share its infrastructure.
Rio Tinto and BHP revealed a massive $US116 billion ($146bn) merger of their Pilbara iron ore operations earlier this month, stirring hope in the junior sector that the ore giants might ease up on sharing infrastructure.
Atlas already has a port access agreement with Fortescue Metals Group, which is open to sharing its infrastructure with rivals.
AGO Price at posting:
$1.86 Sentiment: ST Buy Disclosure: Held
