SYDNEY (Reuters) - Australia’s Sundance Resources (SDL.AX) has recommended a sweetened A$1.65 billion ($1.6 billion) all-cash bid from Hanlong Mining, it said, giving the Chinese firm control of a major iron ore mine project in west Africa.
Sundance said the deal will provide a “substantial” amount of the funding needed to construct its Mbalam mine, along with a port and rail line to initially ship 35 million tonnes of iron ore a year directly to steel producers.
At that rate, Mbalam, straddling the Republics of Congo and Cameroon, would be on a par with iron ore production of AngloAmerican (AAL.L), much of it through a majority stake in Kumba Iron Ore (KIOJ.J).
The Mbalam project requires significant infrastructure work, including 500 to 600 kilometers (300-370 miles) of rail lines and could cost $4 billion to complete.
“Hanlong’s offer means that the substantial financial support needed for this integrated port, rail and mine project will now be available,” Sundance Chairman George Jones said in a statement.
Hanlong, the biggest shareholder in Sundance with 18.6 percent, raised its offer to 57 cents per share from 50 cents previously to secure an agreed deal and unanimous board recommendation, according to Sundance.
The takeover is conditional on regulatory approvals by the governments of Australia, the Republic of Cameroon, the Republic of Congo and China.
Sundance on Monday had requested its shares be placed in a trading halt ahead of an announcement on Hanlong’s proposal by Wednesday. Sundance shares last traded at 43 cents.
Despite turmoil in recent years, west Africa has drawn attention from iron ore explorers such as Rio Tinto, Vale, and Xstrata XTA.L.
China is already the world’s biggest steel producer, accounting for nearly half the world’s output, and imports more ore than any other country. In 2010 it imported more than 618 million tonnes, just 1.4 percent below a record level in 2009.
Reporting by Jim Regan; Editing by Balazs Koranyi