http://www.theaustralian.news.com.au/business/story/0,28124,26218...

http://www.theaustralian.news.com.au/business/story/0,28124,26218329-36418,00.html

BHP Billiton's bid for United Minerals could signal the start of a buying frenzy from BHP and fellow giant Rio Tinto on junior miners as they look to block China's move on Western Australia's Pilbara region.

BHP’s $204 billion bid today scuttled China Railway Commercial Corp's (CRM) $27.2 million bid for an 11.4 per cent stake in United.

DJ Carmichael head of research Paul Adams said the Pilbara was “particularly hot at the moment” and he expected BHP and Rio to continue M&A activity in the junior sector to protect their long term interests in the Pilbara.

“We would not discount that at all, we think the whole region is in play,” he said.

“They’re looking to protect their long term interests in the iron ore market in the Pilbara.

“It’s a big strategy game and I guess the long term outcome will be determined by what happens in the junior end of the market.”

Fat Prophets senior resource analyst Nick Raffan said such a scenario “could certainly happen” as BHP and Rio look to control supply and pricing of iron ore.

“I’d be quite surprised if they weren’t thinking along those sorts of lines,” he said.

“I think the real risk is the Chinese get a real wedge in the industry so they start to become a real price maker through changing supply.

“BHP and Rio can control the supply if they control the deposits.”

A stock broker, who declined to be named, said emerging Pilbara miner Atlas Iron could be a potential target.

But BHP and Rio were not expected to pay high prices for acquisitions at this time, the broker said.

Atlas shares jumped more than 5 per cent today, along with Grange Resources (4 per cent), Brockman Resources (5 per cent) and BC Iron (5 per cent).

Mr Adams said the BHP’s $1.30 bid was a good deal for BHP and was “thrusting the knife into China’s side once again”.

“We think this is a good deal for BHP,” he said.

“With the price of United Minerals where it is at the moment at around about the same level of the offer price, the market is saying that maybe they’re not expecting someone to come in over the top.”

Mr Raffan agreed and said a rival offer was unlikely.

“With the market cap (of United Minerals) sitting around $200 million, the market is really saying we don’t think there’s going to be another bid and BHP have clearly come out and said that’s it, they’re not going to up it at all,” he said.

“If you look at the offer from BHP at $204 million and the total resource announced recently by United Minerals was I think 158 million tonnes, that’s equivalent to $1.29 a tonne, I think that’s a pretty reasonable price.”

United Minerals is being advised by UBS.