* BCI launches friendly $237 mln offer for Iron Ore Holdings
* Cash, share offer is a hefty 79 pct premium to IOH stock
* IOH board unanimously recommends shareholders to accept
(Adds Atlas CEO comment, BHP profit forecast, detail)
By James Regan
SYDNEY, Aug 11 BC Iron Ltd has launched
a friendly cash and share offer worth around A$256 million ($237
million) for smaller rival Iron Ore Holdings Ltd, the
second takeover in a month aimed at beefing up production in
Australia's main iron ore region.
Australian miners continue to rack up strong profits from
iron ore despite falling prices this year, although many have
been under pressure to improve efficiency in the face of
uncertain demand from key buyer China.
Mining major BHP Billiton is expected to show that
more than half its projected $14 billion in fiscal 2014 profit
will come from iron ore when it reports financial results on
Rio Tinto said last week that first-half
profit from iron ore made up 92 percent of company-wide
underlying earnings of $4.68 billion.
BC Iron is offering 0.44 of a share and A$0.10 in cash per
IOH share, valuing Iron Ore Holdings stock at A$1.59 - a hefty
79 percent premium to prices over the last 60 days.
"We believe that combined with our existing business, IOH's
portfolio of long-life iron ore assets in the world's best iron
ore address, presents us with an excellent opportunity," said BC
Iron Managing Director Morgan Ball.
Iron Ore Holdings stock climbed more than 50 percent on
Monday to a high of A$1.43. BC Iron dropped as much as 10
percent to A$2.97.
BC Iron's proposal follows a successful move by China's
Baosteel Resources and Australian rail operator Aurizon Holdings
Ltd to take control of the West Pilbara Iron Ore
project after sealing a $1 billion takeover of Aquila Resources.
BC Iron exports about 4.3 million tonnes of iron ore a year
and its deal could add a further 8 million tonnes.
IOH 's board is unanimously recommending shareholders accept
BC Iron's offer in the absence of a superior proposal.
Atlas Iron, another small producer, has watered
down speculation that it could be a willing target for companies
looking to expand in the Pilbara.
"There is a really clear proxy for value for Atlas and our
undeveloped Pilbara projects. It arises from the recent
Baosteel-Aurizon bid for Aquila," Managing Director Ken Brinsden
told a media briefing on Aug. 4.
"We're definitely not on the market. I'm just saying that as
a proxy for value, when you consider that the Aquila bid is now
complete, the transfer across to Atlas is a strong one."
Along with Atlas, BC Iron and IOH are small-scale producers
in the Australian Pilbara iron ore belt, which is dominated by
Rio Tinto, BHP and Fortescue Metals, which in total
will dig more than a half-billion tonnes of iron ore this year.
"This will give both BCI and IOH better economies of scale
in the Pilbara and open up the potential for greater synergies
for the two companies, particularly given where the assets are
located in the Pilbara," said Morgans Stockbrokers mining
analyst James Wilson.
Miners in Australia rode the iron ore boom to its peak in
2011, when ore sold for close to $200 a tonne on the back of
strong demand from Chinese steel mills.
Since then demand growth has slowed in China, driving iron
ore below $100 a tonne and leading miners to offer discounts to
maintain sales and ponder ways to reduce operating costs -
namely by mining more ore and optimising limited infrastructure
such as rail lines and ports in the remote Pilbara.
A condition placed on BC Iron's offer is that iron ore
.IO62-CNI=SI does not close below A$90 a tonne, converted from
U.S. dollars to Australian dollars, on any 20 consecutive days.
The price last stood at $95.70, or A$103 a tonne.
(1 US dollar = 1.0782 Australian dollar)
(Additional reporting by Lincoln Feast; Editing by Joseph