UPDATE: Exxaro Offers Up To A$338 Million For Australia's African Iron
11 January 2012 - 11:47AM
Dow Jones News
South African diversified mining company Exxaro Resources Ltd.
(EXX.JO) said Wednesday it would pay up to A$338 million (US$348
million) in cash for African Iron Ltd. (AKI.AU), an
Australian-listed company developing an iron-ore mine in the
Republic of Congo.
Exxaro said it would offer 51 Australian cents for each African
Iron share--increasing to 57 cents if it secures a holding of at
least 75%. The bid values African Iron at A$302 million at the
lower price and A$338 million at the higher end.
The Pretoria-based company has plans to develop a significant
iron-ore asset in west Africa, which is emerging as a potential
challenger to key export regions for the steelmaking commodity in
Australia and Brazil. Last year, Exxaro failed in a bid to acquire
Australian iron-ore concern Territory when it was out-bid by Hong
Kong-based Noble Group.
The companies said in a joint statement that the offer has
support from Perth-based African Iron's board and its largest
shareholder, Cape Lambert Resources Ltd. (CFE.AU), which has agreed
to sell an almost 20% stake. Exxaro has already secured approval
for the deal from regulators in Australia and South Africa, they
said.
"We have invested a significant amount of time and resources in
due diligence on this acquisition, including several site visits
and meetings with senior members of the Republic of Congo
government," said Sipho Nkosi, chief executive of Exxaro.
Nkosi said the company would leverage its bulk commodity and
iron-ore experience to develop the Mayoko project, which African
Iron has previously said will begin production next year with
annual output of five million metric tons over at least the next
decade.
Exxaro is one of the world's largest producers of mineral sands
and operates a number of coal mines in South Africa that supply
state power company Eskom Holdings Ltd. It also retained a 20%
stake in South Africa's massive Sishen iron-ore operation when it
was created in 2006 with the break up of Kumba Resources into
Exxaro and Anglo American PLC-controlled (AAL.LN) Kumba Iron Ore
Ltd. (KIO.AU).
"The price offered by Exxaro for the African Iron shares
represents a significant premium to the current trading levels of
African Iron and, as such, is an opportunity for Cape Lambert and
its shareholders to generate a considerable return," said Tony
Sage, chairman of Cape Lambert, which had built up a 25.25% stake
in the company.
Cape Lambert a year ago sold the business that controlled the
Mayoko project to Sterling Minerals, later renamed African Iron,
for 120 million shares, A$47 million in cash and a royalty of
A$1-a-ton on future ore shipped from the project.
Exxaro's offer, which is subject to a minimum 50% acceptance,
will be funded from cash reserves and existing debt facilities, it
said. The offer is set to close Feb. 14.
Exxaro is being advised by Investec Bank and Gilbert &
Tobin, and African Iron's legal adviser is Freehills.
-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094;
robb.stewart@dowjones.com
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