[miningmx.com] — EXXARO Resources said it would pay as much as R2.8bn in cash, representing a 49% premium, for shares in African Iron, an Australian-listed iron ore exploration company with two assets in the Republic of Congo.
“African Iron represents a reasonably sized opportunity which will allow Exxaro to leverage its bulk commodity and iron ore expertise,” said Sipho Nkosi, CEO of Exxaro Resources in a press statement this morning.
Exxaro is offering A$0.51 per African Iron share, a 25% premium to the company’s share price before it was placed on a trading hold by the Australian authorities on Tuesday. However, the offer increases to A$0.57 per African Iron share if acceptances reach 75% of total shares, valuing African Iron at A$338m or R2.8bn. Exxaro would fund the bid using cash resources.
The offer already has the support of African Iron’s board in the absence of a higher offer. “The African Iron board of directors has carefully considered the offer by Exxaro and in the absence of a superior proposal, the board unanimously recommends that shareholders and listed option holders should accept the offer,” said Ian Burston, non-executive chairman of African Iron.
Exxaro’s offer also has the support of Cape Lambert, an investment house which will sell nearly 20% of its total 25% of African Iron with the balance to be vended at a later date. “The decision to agree to accept the takeover offer was not taken lightly … however we felt that to do so at this time would allow us to realise a significant return,” said Cape Lambert chairman, Tony Sage. It would retain exposure to the Mayoko project through a royalty.
There is no mention of whether another major shareholder, Equatorial Resources which also owns 20% of African Iron, supports the offer. Exxaro’s bid also includes a A$0.31 per share offer to option holders, which increases to A$0.37 per listed option if Exxaro wins 75% acceptance of its bid.
African Iron owns the Mayoko iron ore project situated in the Niari Prefecture of the Republic of Congo some 300km north-east of the Pointe-Noire, a port on the Atlantic Ocean. The project has a JORC compliant mineral resource of 121 million tonnes of iron ore. Its other prospect is adjacent to Mayoko.
A heavy haulage mineral railway, which runs to Pointe-Noire, passes within 2km of the prospect, Exxaro said in its press statement. This supports the view that Mayoko is a near-term development opportunity.
Exxaro said the offer for African Iron was consistent with its objective of expanding into the iron ore sector.
Last May the company bid for Australian listed company, Territory Resources, which owned operating iron ore and some coal assets in Australian. Its offer, however, was trumped by major shareholder Noble Group, a trading house in Singapore.
Interestingly, Exxaro said the push into Republic of Congo represented “… an attractive platform for further growth in the commodity”.
Exxaro’s offer had already received the approval of Australia’s Foreign Investment Review Board, as well as South African regulatory approvals. As a result, the transaction requires 50% takeup for it to become effective.
