reminiscing

I knew the feeling I am having about Extract was familiar - and I just remembered why.

There was a lovely iron ore hopeful in the Pilbara called United Minerals. They took up a lease that BHP had been forced to relinquish (after doing nothing with it for 20 years), and being a diligent little company - started drilling. They rapidly proved up well over 100million tonnes of very high grade Iron Ore (68% Fe) a fair proportion of it direct ship material. The resource was worth well in excess of a billion dollars.

Shareholders rejoiced.
Possibilities were enthused over, and the share price soared.

UMC had two rail lines that were within easy reach - one actually passed over their tenement (I think it was the BHP line). They could even have trucked the ore to the Fortescue line. Of course, we know, that neither BHP nor Rio were falling over themselves to offer access to these privately owned facilities.

The nature of the commercial reality - was hotly debated, and the share price slid a little. Shareholders awaited the State Government ruling on line usage, and time passed.
More time passed and the GFC came upon us all.
Resource upgrades occurred, and the faithful shareholders rejoiced again.
Then, a Chinese company made a conditional offer for little UMC, and suddenly BHP decided that things had gone far enough. They launched a takoever that was probably something like 16% premium on the prevailing share price (I can't actually remember), and the directors unanimously recommended the offer.

People hoped for and expected a counter bid to pay "market value", but the need to negotiate rail access with BHP or Rio made it all too hard.

The company was sold for a fraction of the real value, and the faithful die hard shareholders were shrill in their accusations of management sell outs (and the shareholders seemed to be right to my way of reading things).

What to learn?

The market does not always pay fair value for what a resource seems to be worth.

Rio Tinto has their foot firmly on the throat of Extract. Holding nearly 20% of the company at the start of the process is a strong disincentive to any predator - unless they just wanted to make Rio pay more to ultimately own what is naturally theirs. Most companies don't do that sort of vendetta style activity, as it costs them real money to launch a bid. Itochu also has their foot resting right near Rio's foot, with just a little less ownership.

I think Rio and Itochu have some sort of understanding.

I hope that I am wrong, but the feeling I am getting is very similar to UMC.