Iron stocks plummet as Harbinger offloads Murchison
Sarah-Jane Tasker From: The Australian April 29, 2010 12:00AM
US hedge fund Harbinger Capital is continuing its selldown of Australian iron ore miners, with Murchison Metals its latest target.
Philip Falcone's Harbinger is rumoured to be behind the dumping of about 45 million Murchison Metals shares on Tuesday, days after he offloaded a block of shares in Andrew Forrest's Fortescue Metals Group.
Shares in Murchison slumped 9.59 per cent yesterday to $2.45, making it one of the hardest hit among the iron ore stocks, which were all down as commodity prices retreated.
Harbinger was said to also be behind a 30 million share sale in Pilbara miner Fortescue last week, as it continued to reduce its stake in the "third force" in iron ore, which has dramatically dropped from 16.2 per cent to 4.2 per cent over the past year.
Speculation last week suggested Mr Falcone is unsure about the continued strength of China and believes this could be a potential problem, given his heavy exposure to the economic powerhouse.
MF Global Australia's head of equity sales Nick Burmester said Harbinger was the "ultimate insider" in terms of insight into markets. "If they thought there was an enormous amount of upside from here, they would not be selling those amounts of stock," he said.
The selldown in the Mid West miner came as Murchison released its quarterly report, which highlighted the increasing price of iron ore and continuing demand from China.
Market speculation suggested that Mr Falcone sold the Murchison stock at $2.50 a share, using UBS as the broker. UBS was also said to be behind the Fortescue sale.
The two special crossings included one for 25 million shares and another for 19.8 million.
It is unclear whether one seller offloaded 44.8 million shares representing 10.3 per cent of the company or if the smaller trade was onselling, meaning only 25 million shares representing 5.7 per cent were offloaded.
It is understood institutions purchased the shares.
Harbinger is the largest shareholder in Murchison with 18.84 per cent.
If it has offloaded 10 per cent of its interest, it will drop to the second-largest investor behind South Korean steel giant Posco, which has a 11.61 per cent stake in the Mid West miner.
Mr Burmester said Harbinger would be having daily discussions with the companies over what they were experiencing.
"Being a large global hedge fund they would have very good insight into what is going on in terms of the demand environment for iron ore," Mr Burmester said.
"I suspect they think things are getting pretty choppy, particularly when you look at where the spot price has gone."
Despite his selldown in Australian iron ore miners, Mr Falcone is said to be the main backer of ex-Fortescue chairman Gordon Toll's iron ore venture, Ferrous Resources.
Brazil-focused Ferrous is rumoured to shortly be listing on the London Stock Exchange, in what is expected to be one of the largest mining IPOs for quite some time.
MMX Price at posting:
$2.42 Sentiment: LT Buy Disclosure: Held
