we will look afta ya

Forget the mid west, come to ARH we will look afta ya!!!

Japan v China for WA iron ore Font Size: Decrease Increase Print Page: Print Kevin Andrusiak and Nigel Wilson | October 11, 2007
JAPANESE interests have made a strategic play to head off Chinese rivals in the race to build $3 billion of infrastructure and open up the lucrative West Australian Mid West region.

Murchison Metals, backed by Japanese trading giant Mitsubishi, yesterday launched a $1 billion bid for Midwest Corporation - backed by Sinosteel. This threatens to spoil the hopes of Yilgarn Infrastructure and its Chinese backers to secure rights to build iron ore rail and port facilities near Geraldton.

In what is already shaping as a protracted and complicated battle, Murchison lobbed a scrip offer for Midwest, after failing to convince its board and major shareholders that a friendly merger was the way forward.

The pair have long been mooted as possible partners in the region, where a lack of infrastructure threatens development of numerous projects at a time of rising resources prices.

The two companies have separate visions for how to unlock the Mid West, which means that Chinese money is pitted against the Japanese.

The situation forced Chinese president Hu Jintao to lobby the West Australian Government in favour of Midwest, which is backed by Yilgarn Infrastructure, when he visited the country as part of the APEC forum.

The WA Government has long tried to get the two warring factions to work together, but this week announced a tender process where the two parties would contest to build infrastructure.

State minister for planning and infrastructure Alannah MacTiernan said the logical way forward was for the two companies to work together. "If this is to progress smoothly, the logical and grown up thing to do is to work together. There would be no contestability arrangement," she said.

Yilgarn said it was in "wait and see" mode, but added the merger news was a plus.

"Yilgarn's exclusive agreements with Midwest Corporation hold us in good stead for a positive outcome with respect to merger or acquisition discussions between miners in the Mid West," a spokesman said.

"This may finally lead to the combining of forces for the region that Yilgarn has been advocating for the past two years."

But any tie-up between Murchison and Midwest could prove impossible, with Murchison last night indicating it would not budge from an the all-scrip offer on the table.

Murchison has offered one share for every 1.08 Midwest shares. Should Midwest incur a tax liability for selling its 50 per cent stake in the Weld Range and Koolanooka projects to Sinosteel, the offer then becomes one Murchison share for every 1.16 Midwest shares. Midwest has rushed to appoint defence advisers before it moved to conduct due diligence on Murchison's assets and asked shareholders to hold tight.

"Midwest has serious concerns about the underlying value of Murchison's resources," a spokesman said. "The resources at Weld Range are very questionable because of the way they lie - that's no secret."

Murchison's Weld Range project is still in the grass roots exploration phase, while its Jack Hill's open cut project has an indicated and inferred resource of 97 million tonnes, with an average grading of 52 per cent iron.

Midwest's latest resource estimate for its Jack Hills project, which is in the pre-feasibility stage, is 114.4 million tonnes at an average grade of 58.7 per cent iron.

Murchison claims a merged entity could be producing 45 million tonnes by 2013, mostly from the Jack Hills deposit.

A bidder's statement is due October 19.

Meanwhile, the ASX flagged its intention to scrutinise the announcement. The possibility of a bid was telegraphed to the share market late on Tuesday when Midwest shares rose 10.5 per cent.

ASX spokesman Matthew Gibbs declined to comment about the two companies, but said takeover announcements were investigated as a matter of course.

"Announcements of this sort always act as a trigger for us to go back and look at the trading activity in the lead-up," Mr Gibbs said.
"We will look very closely at trading activity to assure ourselves that the market was kept informed and there is nosuspicion of trading in privileged or confidential information that the market asa whole was not in possession of."

Analysts in Perth expressed surprise at the composition of the Murchison offer, reflecting that it was unusual for an all-scrip bid to succeed in the resources sector.

"You'd have to say that it looks like a pig in a poke," one unnamed analyst said.