BC Iron to Add Pilbara Iron Ore Mines in A$229 Million Deal

Aug 11, 2014 3:08 am ET

(Updates to add closing share prices in fifth paragraph.)

Aug. 11 (Bloomberg) -- BC Iron Ltd. agreed to pay about A$229 million ($212 million) in cash and shares for Iron Ore Holdings Ltd. to add mine and port development projects in Australia’s Pilbara region.

Perth-based BC Iron has offered 0.44 of a share and 10 cents for each Iron Ore Holdings share, according to a statement today. That values the target at about A$1.42 a share, 49 percent more than Iron Ore Holding’s Aug. 8 close of 95 cents.

Adding Iron Ore Holdings, 53-percent owned by billionaire Kerry Stokes’s Australian Capital Equity Pty’s Wroxby Pty unit, gives BC Iron access to resources of 1.6 billion metric tons of iron ore, development projects and a port lease at Cape Preston.

“It’s a really positive deal for us,” BC Iron Managing Director Morgan Ball said on a conference call with investors. “It’s in the Pilbara, our backyard, and we’ve always talked about wanting to focus on growth opportunities in Australia.”

Iron Ore Holdings surged 39.5 percent to close at A$1.325 in Sydney, the most since Jan. 8, 2009. BC Iron slipped 9.7 percent to A$2.99, the biggest fall since March 16, 2011.

Iron ore, which entered a bear market in March amid higher supply from Australia and Brazil, rose in July for the second consecutive month on speculation demand from China is improving. Prices may rebound as supply growth slows and China’s higher cost domestic mines close, according to Vale SA, the world’s biggest iron-ore producer.

Offer Conditions

Ore with 62 percent content delivered to Tianjin port in China, fell 0.3 percent to $95.70 a dry ton on August 8, according to The Steel Index Ltd.

The offer is subject to BC Iron gaining acceptance of 90 percent of shareholders and on agreements on a change of control from the Pilbara Ports Authority, according to the statement.

Azure Capital Ltd. and Herbert Smith Freehills are advising BC Iron, with ANZ Corporate Advisory and Gilbert & Tobin advising Iron Ore Holdings.