Resource News

Atlas Iron agrees takeover of Aurox Resources

PILBARA iron ore miner Atlas Iron has moved on junior Aurox Resources in a $143 million share deal to gain access to extra capacity at a Port Hedland port.

The deal will see Aurox shareholders receive one Atlas share for every three Aurox shares held. Aurox’s board has unanimously recommended the merger, which would create an iron ore miner with a combined market capitalisation of $1.13 billion.

Shares in Aurox soared on the news, increasing 144.5 per cent to 66c in early trading.

“Whether you are in Hunter Valley coal or Pilbara iron ore it is all about resource quality, infrastructure access and economies of scale,” Atlas Iron managing director David Flanagan said.

“This merger creates one company with an outstanding rapidly growing production profile supported by port capacity in one of the world’s greatest bulk export ports.”

Hartleys resources analyst Andrew Muir said the merger was a very cheap way for Atlas to get access to Aurox’s Utah Point port capacity.

Aurox has 6 million tonnes per annum of port capacity at Port Headland’s new Utah Point facility from 2012, increasing to 10-12mtpa from 2015. This port capacity was allocated for Aurox’s Balla Balla magnetite project.

“Given the current port constraints within the Port Hedland inner harbour, we see this as an excellent strategic move by Atlas,” Mr Muir said in a client note.

“The merger removes one of the key hurdles to the company’ expanded production plan of 12mtpa of direct shipping hematite ore from 2012.”

Atlas has made no secret of the need to increase scale to support infrastructure in the region and last year moved on juniors Warwick Resources and Hannans Reward.

The iron ore miner bid for Warwick Resources in a $65 million all-scrip deal in September, three months after Warwick bought Hannans Reward’s iron ore tenements

Atlas said under the Aurox deal its shareholders would benefit from an additional 10 million to 12 million tonne long-term port capacity at Port Hedland, as well as full ownership of the Balla Balla magnetite project.

The two companies had announced a port co-operation agreement late last month on the Utah Point port facility being constructed by the Port Hedland Port Authority.

Atlas agreed to advance an interest-free loan of $13.86m to Aurox so the junior could pay a charge to the Port Hedland authority, and in return Atlas would have first right to use any of Aurox’s unused or surplus berth, ship loading and ore stockpiling capacity at the port.

Unlocking infrastructure is the key to success in the Pilbara, with the majors BHP Billiton and Rio Tinto monopolising the port and rails and refusing to allow third party access.

Australia’s competition watchdog last week backed the North West Iron Ore Alliance’s push to collectively bargain for rail access in the Pilbara region.

The alliance, which includes Atlas Iron, Brockman Resources and FerrAus, won the right to collectively bargain for access to the private rail lines of BHP Billiton, Rio Tinto and Fortescue Metals Group…read more at The Australian