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“The transaction will strengthen BC Iron’s Pilbara presence, transfer IOH’S projects into a larger entity, and create a leading mid-cap iron ore company,” the two companies said on Monday August 11.
BC Iron is offering 0.44 new BC Iron shares and A$0.10 ($0.09) in cash for each IOH share, which value IOH at about A$256 million ($241 million).
The IOH board has unanimously recommended shareholders to accept the offer. Its major shareholder Australian Capital Equity also intends to accept the offer in the absence of a superior proposal, according to the joint statement.
The deal will see IOH’s Iron Valley and Buckland projects being added into BC Iron’s portfolio, in addition to the Nullagine mine, which it has a 75% share in.
Iron Valley is expected to start generating “meaningful, low-risk” cash flows from production in the current quarter through a mine gate sale agreement with Mineral Resources, while Buckland is a “long-life, low-capital-intensity” mine-to-port development project with completed feasibility study and all primary tenure and licences secured, according to the statement.
The current infrastructure allows Iron Valley to produce 6 million tpy of iron ore, while Buckland is expected to have an 8-million-tpy output.
“We believe IOH’s long-life assets are a strong fit for BC Iron, and the transaction will result in a combined group with an attractive mix of production and development stage projects,” BC Iron chairman Tony Kiernan said in the statement.
BC Iron, however, is able to cancel the deal if iron ore prices fall below $90 per tonne cfr China for 20 consecutive days during the offer period.
Metal Bulletin’s 62% iron ore index stood at $94.99 per tonne cfr Qingdao on Friday August 8. It has been hovering around that level for the past month.