trying to enter the back door

Morning,

Another beautiful day in paradise walking along Bondi Beach.

As I looked up at the houses overlooking this beautiful part of the world I could not help thinking what a wonderful asset they would be to own.

I must admit, I covet one of those magnificent dwellings.

In much the same way Hanlong must have looked at Sundance's iron ore holdings in West Africa and thought what a wonderful asset to own.

Let's knock on the door and see if we can buy it.

But Hanlong is being a bit too sneaky for its own good.

It wants to buy our much-loved company for 50 cents a share.

It is trying to bargain hard by coming up with as numerous ideas about why that is a good price in today's market.

After all, it argues, it has a high infrastructure cost, iron ore prices MAY be lower when it comes into production in four years, there could be cost blow outs and it could take longer to build the necessary rail and port.

Good try.

But Hanlong can't have it both ways.

If it wants to look into its crystal ball to try to GUESS where iron ore prices MIGHT be in four years, then Sundance should also be allowed to look into its crystal ball and GUESS what its iron ore reserves might be in four years time.

My guess is it would be in the billions of tonnes.

Hanlong is trying to have its cake and eat it too. It can not offer a takeover price TODAY based on assumptions of where iron ore prices might be in four years.

Otherwise it should be offering a fair price Today based on iron ore prices TODAY.

Sundance's modelling is based on iron ore prices of $62 a tonne - current prices are three times that.

I could knock on the door of a Bondi home and offer to buy the house.

I could argue that the home is indeed beautiful with magnificent year-round ocean views.

I could try to argue, in a bid to get the price down, that it is buffeted by the afternoon sea breeze, which makes sitting on the balcony unpleasant.

I could argue that it is peppered with salt from the ocean which rusts gutters and metal around the home.

I could argue that it faces the full force of strong winds in winter which would make it unpleasant and of course there would be times of the year when seaweed would wash up on the beach creating a very unpleasant odour.

And of course maintenance costs in five years time will be very high.

I could then offer the owner less than half the market value for his home.

I know what his answer would be. Sundance should say the same thing to Hanlong.

It seems to me the Greeks are not the only ones who try to sneak in the back door.