BHP Billiton paid $1.30 for each UMC share, a price which was 43% higher than the prevailing market. The acquisition was priced at $1.27 a tonne of ore, setting what can now been seen to be a low benchmark.
Last year, Iron Ore Holdings sold undeveloped iron ore deposits at a price of around $1.35 a tonne.
The two latest deals, which could cause a general uplift in values, involve Rinehart’s Roy Hill project, and the Daltons project of Atlas and Haoma Mining.
In Rinehart’s case, the little public information available indicates that Asian steel mills are buying a share of the Roy Hill project at a price equivalent to around $4 per tonne of ore.
That price can be calculated from the notional $10 billion value assigned to the project when the Korean steel maker, Posco, last year became the first outside investor in Roy Hill, paying a reported $US1.6 billion for a 15% interest. Japan’s Marubeni and Taiwan’s China Steel are also reported to be paying similar prices per tonne for smaller stakes in the project.
A value per tonne can be calculated using information on Rinehart’s website, which says Roy Hill contains a total of 2.42 billion tonnes of ore, in the categories of indicated and inferred, and divided between ore that is above 55% iron and a secondary category of ore assaying between 50%-and-55% iron.
Using the approximate value of $10 billion put on Roy Hill by Posco, and dividing it by the total of 2.42 billion tonnes of ore, leads to a value of $4.13 a tonne.
In the Atlas/Haoma deal, announced yesterday, a value of $5.79 a tonne was placed on undeveloped ore. That deal covers the residual part of a deposit called Daltons, which was co-owned by Atlas (75%) and Haoma (25%), and which Atlas plans to bring into production soon.
Under the terms of the Daltons deal, Atlas is paying Haoma $33 million ($10 million cash and $23 million in Atlas shares). Given that Daltons contains 22.8 million tonnes of ore, and Haoma is entitled to 5.7 million tonnes, that values the orebody at $5.79 a tonne.
Confirming that high value per tonne is a secondary part of the agreement – that Atlas will pay Haoma $5.50 a tonne for any ore mined above 24 million tonnes.
Read more at EurekaReport: http://www.eurekareport.com.au/article/2012/3/28/iron-ore/iron-surprise#ixzz22NOvcfwk
SDL Price at posting:
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