an independent expert report must deem the deal to be in the best interest of shareholders for the scheme to go ahead
BHP flexes muscles with UMC bid -------------------------------------------------------------------------------- Friday, 16 October 2009 Colin Jacoby
BHP Billiton has made an unprecedented move into Western Australia’s emerging junior iron ore sector, slamming a $A204 million all-cash bid on the table for United Minerals Corporation and its flagship Railway project in the Pilbara region.
The world’s biggest miner today announced that it would offer to purchase all the shares in the iron ore junior through its BHP Billiton Minerals subsidiary for $1.30 per share by way of a scheme of arrangement between UMC and its shareholders.
The offer price is a 43% premium to UMC’s share price of 91c on October 6, the date the company entered a trading halt following receipt of BHP’s proposal.
Shares in UMC came out of the trading halt today and promptly shot up 40% to an intraday high of $1.28 with over 7.7 million shares changing hands by noon.
Today’s news comes after UMC announced a $27.2 million placement to China Railway Materials Commercial Corporation last month, with a condition of the placement being the signing of a 10-year, 3 million tonne per annum offtake agreement between the two parties. The placement would give steel buyer CRM an 11.38% stake in UMC.
That deal is now in limbo as the UMC board intends to unanimously recommend BHP’s offer, which is conditional on UMC abandoning the CRM offer.
The transaction is also subject to UMC shareholder and regulatory approvals, and an independent expert concluding the scheme is in the best interests of UMC shareholders.
UMC said in a statement that BHP’s offer eliminated project risk for its shareholders and offered certain cash in uncertain times.
“The CRM transaction had a number of attractions for the company, but the BHP Billiton proposal crystallises value for all UMC shareholders now,” UMC chairman Alan Birchmore said.
The jewel in the crown for BHP, in terms of the takeover, is UMC’s Railway iron ore deposit which lies adjacent to Mining Area C, owned by the Goldsworthy joint venture of which BHP has an 85% stake.
The Railway deposit has an indicated and inferred resource of 158.1Mt grading 58.03% iron or 63.09% calcined iron, 3.42% alumina, 5.07% silica, 0.06% phosphorus and 8.02% loss on ignition.
Production from Railway is anticipated to begin in early 2011, targeting an initial 3Mtpa operation.
“BHP is the logical owner and developer of the Railway deposit given the proximity to BHP Billiton’s iron ore deposits and established mine and rail structure,” BHP iron ore president Ian Ashby said in a statement.
“This acquisition is consistent with our plan of capturing growth options to deliver long-term shareholder value.
“We are pleased that we have been able to reach an agreement with the board of UMC to present what we believe to be a compelling cash offer to UMC shareholders.”
UMC said today that it would conduct a restructure of its operations and dispose of assets so the company only held the Railway deposit if and when BHP’s acquisition went ahead.
BHP has advised that its offer is final in the absence of a competing proposal.
MiningNews.net was unable to receive comment from UMC prior to publication.
Shares in UMC were last trading at $1.26 while BHP had gained 48c to $39.38.
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UMC Price at posting:
$1.27 Sentiment: Hold Disclosure: Held
