Mineral Resources has dropped out of the takeover tussle for junior miner Atlas Iron.
The company says it won’t make a counter proposal to that made by Gina Rinehart’s Redstone Corporation, a subsidiary of her company, Hancock Prospecting.
Her all-cash $390 million offer for 100% of Atlas Iron is the highest bid and a premium of around 41% to the Mineral Resources offer, an all-scrip bid made in April.
Atlas Iron shares were trading at $0.045, up 2.2% today. The Mineral Resources offer was at 3.02 cents a share and Rinehart’s at 4.2 cents.
The next move must be by billionaire Andrew Twiggy Forrest’s Fortescue Metals, which has a 19.9% holding in Atlas, enough to block any takeover.
He hasn’t indicated whether he will sell or sit on his holding. However, the key purpose of the holding was to block Mineral Resources.
“Fortescue does not intend to support the proposed Scheme of Arrangement between Atlas Iron and Mineral Resources,” the company said earlier this month.
Rinehart, before the takeover bid, had also amassed a 19.9% stake in Atlas.
The suitors see upside in consolidating the Atlas iron ore assets, which have high iron content ore, in the Pilbara into their own.
“We see long term synergies between the Atlas assets and the other iron ore interests within the Hancock Group,” says Hancock executive director Tad Watroba.
“There is potential to unlock value through the future development of Atlas resources as part of our wider system of operations.”
Atlas Iron was an early victim of falling iron ore prices. In April 2015, it announced it was mothballing its mines because it was costing more to dig up the ore than buyers were willing to pay.
The crash in iron ore prices was then driven by softening Chinese demand. Since then the company has restructured, global prices have surged and the miner is cash flow positive.
In the latest half year results, Atlas posted a statutory net loss after tax of $21 million. Sales were $308 million, down from $498 million.
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