Emerging Australian iron ore miner Atlas Iron Ltd has agreed to buy Aurox Resources Ltd, a more junior iron ore miner, in a deal worth AU$149 million ($136 million).
On March 10, both companies announced that a scheme implementation agreement (SIA) had been executed to effect a merger of the two companies.
According to the agreement, Aurox shareholders are to receive one Atlas share for every three Aurox shares. At the closing price of Atlas shares on March 8, 2010 of $2.21 per share, this represents an offer price of 73.67 cents per Aurox share, representing a premium of 172.85 percent on the closing price of Aurox shares of 27 cents per share on the same day.
As a result of the merger, Atlas will benefit from an additional 10 to 12 million mt per year in long-term Port Hedland port capacity which has been secured by Aurox, making a total of 33 million mt per year. Atlas will also acquire 100 percent ownership of the fully permitted 456 million mt Balla Balla magnetite project.
The merged company will have 187 million mt of direct shipping ore (DSO) resources, exploration targets of 430 to 750 million mt at 57-60 percent Fe, two Pilbara magnetite projects and a 15,000 km2 Pilbara landholding and a DSO production target of 26 million mt per year by 2014.
"It is all about resource quality, infrastructure access and economies of scale," Atlas Iron managing director David Flanagan said in a statement on the merger.
Meanwhile, Aurox managing director Charles Schaus commented, "With iron ore prices expected to increase significantly in the coming year, this merger will give Aurox shareholders the opportunity to share in the benefits from immediate cash flows."
Shareholders of Aurox will be asked to approve the scheme at meetings expected to be held in late May 2010.