trading halt, page-3

I think the Chinese would have expected the outcome from the Takeover panel. If they are keen for a Takeover of MGX they will be keen to get a new agreement in place for the Gazmetall shares which would be the key in a takeover bid, the only way to do this is to announce a takeover bid.

Maybe Gazmetall found another buyer.

Time will tell.

Good article in FN Arena yesterday.


An Opportunity In Mt Gibson?
FN Arena News - April 02 2008

By Greg Peel


Mt Gibson Iron (MGX) currently enjoys a 3/2/0 B/H/S ratio in the FNArena database, and an average target of $3.90 against a last trade of $2.92. Brokers are keen on Mt Gibson because (a) it is an iron ore producer, (b) it has excellent, capital-efficient production growth, (c) it is an iron ore producer, (d) it is trading at an attractive multiple and (e) it is an iron ore producer.


Recently Mt Gibson has been held back however, in the context of a weaker market but also due to some share registry shenanigans.


At the beginning of February a subsidiary of Chinese company Shougang purchased the 19.7% stake in Mt Gibson held by Russian company Gazmetall. The purchase price was $2.60, which was about where the stock was trading at the time. The problem was that another Chinese company - APAC - holds a 22.2% stake in Mt Gibson, and Shougang has a significant stake in APAC. Thus it could be argued Shougang had "backdoored" a stake of almost 42% without satisfying the usual takeover rules.


And that's how the Australian Takeover Panel saw it. Yesterday the Shougang purchase was cancelled. The decision provides various pros and cons.


Firstly, on the pro side, if Shougang had been allowed to keep its stake the risk was Mt Gibson senior management and independent directors would have walked. One presumes they'll stay put for now.


Secondly, the possibility arises that Shougang might decide now just to go for a full bid and be done with it. In this case a "control premium" would need to be added to the offer price. While Shougang has previously indicated it was not interested in 100%, a week is a long time in the market. Analysts are split between those assuming no full bid and those suggesting it's not beyond the realms.


If the above does not occur, Shougang could still satisfy the rules by "creeping" up its stake by 3% every six months. This would put a floor under the stock price, but is not as immediately positive.


On the con side, Shougang may yet challenge the takeover panel ruling, which means a longer period of uncertainty.


Secondly, if Shougang decides to leave it all alone then the Gazmetall stake of 22% still overhangs the market, leaving little scope for the share price to rise in the short term.


Put this all together, and the analysts largely believe an investment in Mt Gibson is a good bet. Iron ore aside, an investor would be buying into a chance of a takeover or, if that's not to be, the Gazmetall overhang will keep a lid on the price, resulting in a cheap buying opportunity. If Gazmetall sells into the market it is a good chance for investors to pick up a stock that has largely been illiquid up to now. And when the sell-down is complete, there will be little holding the share price back.


Or Gazmetall might find another single buyer.


Whatever the outcome, it would seem an investment in Mt Gibson now has little downside, other than the opportunity to average up for the clearance of the Gazmetall stake.