News Bulletin

Wah Nam to become Pilbara?s next Iron Man?

Friday, 12 Nov 2010
A Hong Kong listed company, Wah Nam International Holdings Limited (“Wah Nam”), has this morning simultaneously made scrip-based bids for two emerging Australian iron ore producers Brockman Resources Ltd (“Brockman”) and FerrAus Ltd (“FerrAus”).  Wah Nam is a substantial shareholder of both companies and currently holds 22.63% in Brockman and 19.9% in FerrAus.
 
Wah Nam offered 30 of its own shares for each Brockman share. This implies a value of approximately A$6.50 per Brockman share based on the last traded price for Wah Nam shares on the Hong Kong Stock Exchange (HKSE) of HK$1.69 (A$0.217) per share (giving a total value of around A$930m). From its latest presentation, Brockman has 1.63 billion tonnes in total resource at an average grade of 43.4% Fe, pegging the offer at approximately A$1.32 per tonne of contained iron.
 
Similarly, Wah Nam’s bid for FerrAus entails 6 of its own shares for each FerrAus share, implying FerrAus’s value at approximately A$1.30 per share (and A$267m in total value). FerrAus’s resource base of 316.4mt at an average grade of 56.7% Fe means that Wah Nam’s bid implies a valuation ratio of approximately A$1.49 per tonne of contained iron, similar to the Brockman offer.
 
Based on MinesOnline’s past experience, both of Wah Nam’s bids are within the expected range of between $1 and $2 per tonne of contained iron. However, and notwithstanding FIRB approvals, the takeover offer may face a number of hurdles including the absence of a cash component, Wah Nam’s low liquidity on the HKSE and Australian interest in receiving shares on the HKSE.
 
Boards of both target companies have urged shareholders to take no action and time will tell if this latest acquisition drive from China is successful.
 

     

      

     

     

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