junior iron ore shake-up likely after bid

http://www.theaustralian.com.au/business/junior-iron-ore-shake-up-likely-after-bid/story-e6frg8zx-1225952886153

SURPRISE bids by a Chinese company to move in on Australia's iron ore sector could trigger a bigger strategic play from the Asian giant.
Wah Nam's $1.2 billion hostile bids for emerging Pilbara iron ore miners Brockman Resources and FerrAus continued to be digested by the market yesterday, with analysts not convinced the Chinese investment and limousine company would succeed with its offers.

Hong Kong-listed Wah Nam International is offering its scrip for the two juniors, in two separate deals, valuing Brockman Resources at $929.6 million and FerrAus at $267.4m.

Shares in the iron ore hopefuls surged on Thursday following the announcement of the offers but investor sentiment cooled yesterday.

FerrAus's stock tracked slightly higher, gaining 1.36 per cent to $1.11, while Brockman came off 0.34 per cent to close at $5.95.

Start of sidebar. Skip to end of sidebar.
Related CoverageMiners soar on HK offer Herald Sun, 3 days ago
Chinese chasing iron ore juniors The Australian, 3 days ago
Eager minnow's audacious bid The Australian, 3 days ago
China bids $1.2bn for Brockman, FerrAus Perth Now, 3 days ago
Ore deals on cards as China strikes The Australian, 3 days ago
.End of sidebar. Return to start of sidebar.
Analysts said the Pilbara's junior sector was "ripe for consolidation" but questions remained on the Chinese suitor and its broader intentions.

"No one really knows much about Wah Nam and there is some mystery about the bid and who is really behind it," one analyst said.

"Wah Nam could be a Trojan horse for something. It is weird to offer valueless paper for $1bn worth of assets.

"There must be something behind it."

The market has long expected Pilbara juniors to merge to provide iron ore mass to foster an infrastructure solution, as they have struggled to get access to BHP Billiton and Rio Tinto railways.

Analysts said Wah Nam's move could trigger further deals, by setting the scene for consolidation. Credit Suisse analyst Nathan Littlewood said combining Brockman and FerrAus could achieve critical mass and set up an organisation to rival Fortescue Metals Group.

"We would be amazed if Fortescue has not already had serious discussions with Brockman and perhaps FerrAus regarding possible BC Iron-style infrastructure access joint ventures," he said in a client note.

"While we can see logic in bringing FerrAus and Brockman together, these benefits could be realised without Wah Nam's involvement.

"Alternative deal structures could realise the same benefits."

Mr Littlewood also said he did not believe Wah Nam had balance sheet capacity in its own right to finance the development of the FerrAus and Brockman Resources projects.