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Atlas Iron agrees to takeover by MinRes

9th April 2018

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Iron ore miner Atlas Iron has struck a merger deal with mining infrastructure and production firm Mineral Resources (MinRes), as the companies seek to exploit synergies between their operations.

The amalgamation of the companies' iron-ore mining assets in the Pilbara would enable the combined company to exploit greater synergies and economies of scale, MinRes MD Chris Ellison said on Monday.

This should drive down costs and better position the consolidated iron-ore business in the new environment of lower global prices for low-grade iron-ore.

Ellison said that the increase of iron-ore production in the region also formed a key part of MinRes’ strategy to ensure that its 50-million-tonne-a-year Pilbara infrastructure initiatives were fully used.

Under a scheme implementation agreement, which has been unanimously recommended by Atlas directors, Atlas shareholders would receive one new MinRes share for every 571 Atlas shares held.

Based on the closing price of both companies’ share price, the offer valued Atlas shares at 3.02c a share, a 59% premium to the company’s last closing price.

The news sent Atlas’ share price soaring by 42% to 2.7c a share. Shares in MinRes dropped 6.9% to A$16.05 a share.

Once the scheme is implemented, Atlas shareholders will own some 8.2% of the total issued share capital of the combined group.

Atlas told shareholders that a combination with MinRes would yield a number of meaningful benefits for Atlas shareholders, including potential benefits from transportation services, greater access to capital to pursue growth, portfolio diversification, and a number of scale benefits from a large production base across a broader range of commodities.

“The combination with MinRes will not only protect, but also enhance the Atlas business. The combined organisation will have the scale and financial security to support current operations, as well as providing access to capital to contemplate further development opportunities,” said Atlas MD Cliff Lawrenson.

“The scrip nature of the scheme also delivers a number of key benefits to Atlas shareholders, including retained exposure to Atlas, the opportunity to benefit from potential synergies driven by the combination of greater diversification of revenue and commodity exposure.”

The merger is subject to a number of conditions, including shareholder, court and regulatory approvals, as well as an independent expert opining that the scheme was in the best interest of shareholders.

Meanwhile, in addition to the merger agreement, Atlas and MinRes have also identified a range of opportunities on which to cooperate to enhance the resilience of their respective Pilbara operations.

To pursue these opportunities, the companies have entered into an alliance agreement, which will govern the manner in which the various opportunities will be jointly pursued.

A new vehicle, which will be controlled by Atlas, will be responsible for managing lithium and manganese operations. MinRes is expected to provide the initial working capital for these operations, with Atlas to provide ongoing funding.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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