MELBOURNE: Japan's Mitsubishi Corp has agreed to buy partner Murchison Metals' stakes in an iron ore development and a port and rail project in Western Australia for $315 million, aiming to rescue the two multi-billion dollar projects.
Beleaguered Murchison's shares jumped as much as 49 percent on relief that Managing Director Greg Martin able to do in the current market circumstances, with all of the uncertainties in global had managed to get the company out of a hole.
The A$5.9 billion ($5.7 billion) Oakajee port and rail project and the A$3.7 billion Jack Hills iron ore project have been delayed due to cost blowouts and the failure to line up companies to use the infrastructure.
"Right now, this is the best that we've been financial markets and questions about growth in China, and forward prices for iron ore," Martin said in a conference call.
Murchison is selling its 50 percent stakes in the Jack Hills project and Oakajee port and rail as it was having trouble raising its share of the funding for them.
The Oakajee project was designed to open a second major iron ore province in Australia to challenge the dominance of global giants Rio Tinto and BHP Billiton.
UNANIMOUS BOARD SUPPORT
Murchison said the deal values its stakes at A$0.51 a share, an 85 percent premium to the stock's closing price on Wednesday. It last traded up 47 percent at A$0.405.
Mitsubishi's shares were down 2.9 percent at 1,491 yen.
"Martin seems to have done a good job monetising the asset to Mitsubishi," said Ric Ronge, a portfolio manager at Pengana Capital, which, like most other local funds, stayed out of Murchison's shares as its projects had failed to advance.
Board support for the deal was unanimous, Martin said, implying that Murchison's biggest shareholder, South Korean steel maker POSCO, which has a seat on the board, backed the sale to Mitsubishi.
Martin said the company would continue to pursue talks with other parties, in case it can get a better offer.
"With this offer on the table, other interested parties are now on notice that they must act or miss out," Martin said on the conference call.
Murchison will pay a small break fee of A$3 million if it scraps the deal with Mitsubishi.
Comments
Comments are closed for this article.