oh aussies are not so smart, page-2

Strategically, BHP or RIO are unlikely to join the race for SDL. Here are the reasons:

1. Hanlong holds 18.6%, that is a blocking stake for other predators to join in bidding for SDL, any offer from RIO or BHP will have to be at extreme premiums, cause from what we can see Hanlong wants SDL more than say BMN.

2. BHP and RIO are not the type of companies that overpay for assets in risky countries in Africa, eg. is BHP's low-ball takeover offer back in 2009 for UMC and currently RIO's buy of IOH's Koodaideri South E47/1539 tenement for around 51c per resource tonne (that is largely lower than the 50c offer which equates around $1.18 per resource calculated by UBS report, though both these buys are in the Pilbara, but these companies have no choice for these stranded assets with no railway access. So RIO's bid is low ball for IOH's E47/1539, similar to what BHP offered UMC, opposed to the higher price placement that was offered to CRM.

3. Not sure about BHP, but RIO is unlikely to compete with a Chinese company for iron ore assets, as they opt for cooperation with Chinese companies or clients eg. the RIO-Chalco JV in Simandou

4. Both BHP & RIO (also FMG & AGO) are focused on the Pilbara and are ramping future production there. So all their investments for iron ore lie in the Pilbara.

5. The Cameroon President seem keen for the Chinese to develop the project, with various levels of government involved in both the Chinese and Cameroon parties, an involvement from RIO or BHP would go back to square 1, back in the negotiating table with the government.

I think the 57c is fair value in today's term, it was within what I thought Hanlong was going to offer between 55c to 58c (with the median as 55.2c), but of course lower than what everyone was hopeing for over 60c.