Exxaro clinches African Iron, extends offer

David McKay | Wed, 15 Feb 2012 07:50

[miningmx.com] – EXXARO Resources said it had clinched control of Australian-listed exploration firm, African Iron, a company that owns the 121-million- tonne Mayoko iron ore prospect in the Republic of Congo (RoC).

Shareholders holding 66.59% of African Iron’s shares in issue had accepted Exxaro’s offer of 51 Australian cents which will be increased to A$0.57c, equal to a cash offer of A$338m (R2.8bn), if 75% acceptances are pledged.

However, it’s thought that Exxaro Resources may have to live with shareholder and RoC neighbour Equatorial Resources, which holds 20% of African Iron’s stock. Sipho Nkosi, CEO of Exxaro Resources, said as far as he was aware, Equatorial Resources had not accepted the offer.

Equatorial Resources owns a neighbouring iron ore prospect and has access to the nearby railway. In a deal that Exxaro did well to stitch up before announcing its offer, it did not consult with Equatorial Resources, identified by some analysts as a rival for African Iron.

As Exxaro owned more than 50% of African Iron, the offer had now become unconditional and would be extended a further two weeks to February 28. “You may find Exxaro keeps on extending the offer until it gets the requisite number of acceptances,” said an analyst on Tuesday, adding that this had been Rio Tinto’s tactic in its takeover of Riversdale Mining in Mozambique.

Nkosi said the Mayoko iron ore project, which is situated in the Niari Prefecture of the RoC, would be developed into a 10-million-tonne/year iron ore mine by 2016. The prospect is situated some 300 km north-east of Pointe-Noire, a port on the Atlantic Ocean.

In addition, a heavy-haulage mineral railway, which runs to Pointe-Noire, passes within 2 km of the prospect, Exxaro said at the time of its offer on January 11. This supports the view that Mayoko is a near-term development opportunity, it said. Exxaro said the offer for African Iron was consistent with its objective of expanding into the iron ore sector.

“We believe the fundamentals of iron ore are positive in the medium to long term, and we have in-house expertise and experience in mining bulk commodities,” said Nkosi in Exxaro’s announcement on Wednesday.

“Shareholder support for the bid is clearly evident,” said Ian Burston, independent non-executive chairman of African Iron. He said there had been “a substantial flow of acceptances in the last few days”.