Atlas Iron Limited and FerrAus Limited announced that they have executed landmark agreements to further consolidate the Pilbara region, initially through a combination of the South East Pilbara iron ore assets of Atlas and FerrAus.
They said “This will create a substantial and attractive South East Pilbara focused iron ore development and exploration company with a substantial land holding and resource inventory.”
Immediately after the Subscription and Iron Ore Assets Acquisition are approved by FerrAus shareholders and completed, Atlas has agreed to make an off market takeover offer for all FerrAus shares on issue on the basis of 1 Atlas share for every 4 FerrAus shares, which has an implied offer price of AUD 0.858 per share and represents a significant premium of 34% to FerrAus' closing price on 24 June 2011 and 38% based on Atlas 10 day VWAP on 24 June.
Mr Cliff Lawrenson CEO of FerrAus said “This move represents an exciting step in the consolidation of the Pilbara. From FerrAus' perspective we see tremendous strategic rationale in the combination of both companies' South East Pilbara assets in one vehicle. Not only does it significantly enhance FerrAus' resource base and provide valuable economies of scale, but it also creates a larger, well-funded company with a strong supportive shareholder to provide for the development of those assets. Ultimately however, we believe there are significant additional benefits for all stakeholders flowing from a combination of 100% of both FerrAus and Atlas through this recommended takeover to achieve consolidation of the wider Pilbara region. We strongly consider both transactions to be attractive propositions for FerrAus shareholders that provide real value and represent a superior alternative to either the current takeover offer from Wah Nam or proceeding on a stand-alone basis."
Mr David Flanagan MD of Atlas added “This is an amazing opportunity for both groups of shareholders to share in the benefits of consolidating these strategically important iron ore assets. While the most attractive outcome is the combination of the two companies, the strategic merit of combining the South East Pilbara assets is undeniable. It substantially grows the resource inventory of FerrAus and injects considerable opportunity for rapid growth in resources through continued exploration, while providing the leverage required to pursue infrastructure development in the region."
FerrAus' Directors unanimously recommend that FerrAus shareholders vote in favour of the Subscription and the Iron Ore Assets Acquisition, subject to the opinion of an independent expert.
The Atlas Offer is conditional upon FerrAus shareholder approval and completion of the Subscription and the Iron Ore Assets Acquisition, as well as other customary terms and conditions, including the following:
1. Minimum acceptance condition of 50.1%
2. No Material Adverse Change in relation to FerrAus
3. No Prescribed Occurrences in relation to FerrAus.
In addition, Atlas will declare its offer for FerrAus to be free of all defeating conditions upon achieving acceptances of 50.1%.
The Atlas Board will remain unchanged following the transaction with FerrAus.
Atlas' corporate adviser is Hartleys Limited, legal adviser is Blake Dawson and in China corporate advisor Satori Investments. FerrAus' corporate adviser is Gryphon Partners and its legal adviser is Hardy Bowen.
Atlas Iron Limited is mining and exporting from its 100% owned Pardoo and Wodgina Iron Ore projects, located 75 kilometres and 110 kilometer by road from Port Hedland in the Pilbara region of Western Australia. In the 2009/10 financial year Atlas shipped over 1.2 million tonnes of Pardoo DSO. Atlas is expanding its production from its Wodgina and Pardoo DSO mines following the commissioning of the Utah Point port facility and is targeting exports at an annualized rate of 6 million tonnes by the end of 2010. When combined with additional export tonnages from its Abydos & Mt Webber DSO Projects, the Company is targeting exports at an annualized rate of 12 million tonnes during 2012.
FerrAus Limited is a junior exploration company based in Australia with its focus on the discovery and production of ferrous raw materials, including iron ore, manganese, and nickel. The company has four exploration licenses located in the East Pilbara region of Western Australia with excellent potential for iron ore and manganese deposits.
