June 28, 2018 / 11:24 PM / 18 days ago

Australia's Atlas Iron backs billionaire's buyout offer

SYDNEY (Reuters) - Australian iron ore miner Atlas Iron (AGO.AX) on Friday endorsed a A$390 million ($287 million) buyout from billionaire Gina Rinehart’s Hancock Prospecting, taking the mining heiress closer to securing two key shipping berths in the west of the country.

A subsidiary of Rinehart’s company launched an unconditional cash bid for the miner last week, trouncing a A$280.2 million scrip offer made in April by Mineral Resources (MIN.AX) and prompting that company to cancel its bid.

A successful bid could open the door for Rinehart to develop two more berths at Port Hedland that are alongside her existing operations, as Hancock Prospecting moves into the next stage of expansion at its Roy Hill iron ore mine.

With the backing of the Atlas board, Rinehart is likely to gain more than 50 percent of the miner, giving her a controlling stake.

The board’s endorsement effectively neutralizes some recent moves by world No. 4 iron ore miner Fortescue Metals Group (FMG.AX), controlled by another billionaire, Andrew Forrest, which amassed a 20-percent stake in Atlas.

Fortescue had taken a stake to block the growth of a MinRes-Atlas joint venture in what was already a congested port. It owns berths opposite the planned development, so also had some strategic interest in the berths held by Atlas.

Fortescue earlier this week asked a regulator to halt the Rinehart deal, seeking more information about it.

The Western Australian state government has expressly reserved the berths for small miners but the target, Atlas, has said the government appears to be considering relaxing that restriction. The government said on Friday that it would be talking to the industry to provide more clarity about port development in coming months.

Since most of the region’s iron-rich deposits have been sewn up by major miners, junior companies are stuck with low quality options at a time when China’s preferences have shifted toward high-grade ore. That has all but put the nail in the coffin of the region’s junior iron ore mining space, said Lloyd Hain, an analyst with AME Group in Sydney.

Atlas said in a statement that it recommended the offer from Rinehart’s Hancock, provided an independent expert deemed it “fair and reasonable to Atlas shareholders”, without commenting further on its reasoning.

Spokesmen for Fortescue and Mineral Resources both declined comment.

In a separate statement, Atlas said its information technology systems were affected by a security breach “causing some data disruption”, and that it was working on data recovery.

The statement said the breach did not affect its production activities, but did not say whether the company believed the breach was related to the recent takeover activity.

Under Australian laws which took effect in February, companies must report if data has been compromised.

Atlas said it expected the Hancock offer to open formally early next week and advised shareholders to take no action in the meantime.

Shares of Atlas were up around 1.2 percent on Friday, while shares in Fortescue were down 2 percent and Mineral Resources shares had risen 1.8 percent. The broader market was steady.

Reporting by Byron Kaye in SYDNEY and Chandini Monnappa in BENGALRU; Editing by Richard Pullin and Joseph Radford

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