At­las Iron to buy Gi­ralia for $822m to ex­pand Pil­bara min­ing

The Pak Banker - - Company & Boss News -

SYD­NEY: At­las Iron Ltd. agreed to buy Gi­ralia Re­sources NL in a deal that it said val­ues the iron ore com­pany at about A$828 mil­lion ($825 mil­lion) to al­most triple its po­ten­tial sup­plies of the steel­mak­ing raw ma­te­rial.

At­las is of­fer­ing 1.5 of its shares for each of Gi­ralia's, or 1.33 At­las shares and 50 cents a share, the Perth-based com­pa­nies said in a joint state­ment to the Aus­tralian stock ex­change. The all-share of­fer val­ues the com­pany at A$4.57 a share, 53 per­cent more than Gi­ralia's last clos­ing price, the state­ment said. Gi­ralia's di­rec­tors rec­om­mended the deal.

Buy­ing Gi­ralia, which ex­plores for iron ore close to At­las's de­posits in Aus­tralia's Pil­bara re­gion, will boost out­put and re­duce op­er­at­ing costs, ac­cord­ing to Man­ag­ing Di­rec­tor David Flana­gan. Global min­ing deals have more than dou­bled this year to A$137 bil­lion, the high­est since 2007.

"There's some solid strate­gic ra­tio­nale for At­las get­ting hold of the McPhee Creek de­posit and the Dal­tons de­posit from Gi­ralia," Chris Drew, an an­a­lyst at Royal Bank of Canada, said by phone from Syd­ney. The projects should help At­las's plans to de­velop its Turner River op­er­a­tion, he said.

The ac­qui­si­tion would boost At­las' mea­sured, in­di­cated and in­ferred re­source to 602 mil­lion met­ric tons, up from 205 mil­lion tons now.

Gi­ralia rose 40 per­cent to A$4.18 at the 4:10 p.m. Syd­ney close. At­las was 1.4 per­cent lower at A$2.92, trim­ming gains this year to 55 per­cent.

"At­las has got in­fra­struc­ture that matches its ex­ist­ing pro­duc­tion pro­file but it's go­ing to need more with this Gi­ralia ad­di­tion," Peter Ar­den, se­nior min­ing an­a­lyst at Ord Min­nett Ltd., said by phone from Mel­bourne. "It sort of pro­longs At­las' life in the long-term rather than adds to it in the short-term."

At­las is pay­ing 8.9 times the to­tal as­sets of Gi­ralia, ac­cord­ing to data com­piled by Bloomberg, com­pared with the me­dian mul­ti­ple of 2.5 times for 10 in­dus­try deals since 2003. At­las ships iron ore from its Par­doo and Wodg­ina iron ore op­er­a­tions in the Pil­bara re­gion at an an­nu­al­ized rate of 6 mil­lion tons. "The two com­pa­nies have de­posits that ei­ther join or are very close to each other at Mt. Web­ber, McPhee Creek, Bee­byn Range and Western Creek," Flana­gan said in the state­ment.

Hart­leys Ltd., based in Perth, is ad­vis­ing At­las, with Credit Suisse Group AG act­ing as fi­nan­cial ad­vis­ers for Gi­ralia. The takeover deal car­ries a 90pc ac­cep­tance con­di­tion and will close on Feb. 11 next year, un­less ex­tended. -Bloomberg

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