Australia: Insights and trends for the leading edge of the resources industry

Australian Resources Sector Update: October 2012

Recent Announcements

On 18 September 2012, ASX-listed iron ore miner Western Desert Resources announced that it has received a conditional offer from China's Meijin Energy Group to acquire all of the shares in Western Desert Resources at A$1.08 cash per share (up to A$435 million on a fully diluted basis). On the last day of trading prior to the announcement, Western Desert Resources shares closed at A$0.855 per share. Western Desert Resources has recommended acceptance of the offer, subject to independent review and the absence of a superior bid. Western Desert Resources' Chairman, Rick Allert, has stated that the offer "represents excellent value for shareholders". in addition to shareholders, each option holder in Western Desert Resources will have the right to exercise its options and participate in the offer.

Following ASX-listed Whitehaven Coal's announcement on 10 August 2012 that it had granted Tinkler Group access to the due diligence process in order for tinkler Group to further develop its takeover proposal, Whitehaven Coal has subsequently announced that the due diligence period expired on 23 August 2012 and that Whitehaven Coal has been advised by Tinkler Group that a formal binding proposal of A$5.20 cash per share will not be forthcoming.

Chairman, Andrew Forrest, did not mislead investors in 2004 by misrepresenting the nature of the agreements that Fortescue Metals entered into with three Chinese companies. In giving its ruling, the High Court noted that Fortescue Metals' ASX statements in relation to the agreements "accurately recorded what the framework agreement provided". If Fortescue Metals and Andrew Forrest had lost this appeal, Andrew Forrest would have faced possible disqualification as a company director.

In related news, Fortescue Metals has announced that it has secured an underwritten commitment for a senior secured credit facility of up to us$4.5 billion. This credit facility will provide additional liquidity to Fortescue and will replace its existing bank facilities. In addition, Fortescue has announced that it has been approached by a number of parties who are interested in partnering with Fortescue in relation to certain assets. As the new credit facility does not require such transactions to occur, Fortescue has stated that it will only pursue such a partnership if it will add shareholder value.

As discussed in the September edition of the Australian Resource Sector Update, India's Aditya Birla Group and Prominvest AG have both made offers to acquire all of the outstanding shares in ASX-listed Northern Iron. On 17 September 2012, Northern Iron announced that it expected the detailed stage two due diligence process by Aditya Birla and Prominvest to be completed within the next few weeks. Both Aditya Birla and Prominvest have attended site visits of Northern Iron's operations in Norway.

It was announced on 12 September 2012 that Sentient Group, a Cayman Islands-based private equity firm, has increased its holding in ASX-listed Iron Road from 38.9% to 57.87%. sentient increased its holding in iron road after it underwrote Iron Road's A$40 million capital raising, which was completed on 7 September 2012.

ASX-listed Australian Pacific Coal announced on 28 August 2012 that it was considering divesting its 10% free carry interest in its joint venture projects with Blackwood Resources Pty Ltd. Advertisements for Expressions of Interest have been placed. The joint venture projects relate to four coal exploration permits, namely Bungaban Creek, Kingsthorpe, Quondong (each of which is located in the Surat Basin in Queensland) and Laguna Creek (which is located in the Galilee Basin in Queensland). two of the exploration permits have been granted (Bungaban Creek and Kingsthorpe) and two are still pending (Laguna Creek and Quondong).

ASX-listed iron ore miner Sundance Resources announced on 24 August 2012 that it has accepted China's Hanlong (Africa) Mining Investment Limited's proposal to revise its offer to acquire all of the issued shares in sundance resources via a Scheme of Arrangement from A$0.57 per share to A$0.45 per share. The reduction in price is reportedly due to the recent drop in iron ore prices. Hanlong's proposal was agreed, subject to the absence of a superior offer and the Independent Expert concluding that the Scheme of Arrangement is in the best interests of all shareholders. All regulatory approvals will be required by the second court date, which will be approximately 4 December 2012. The scheme of Arrangement is expected to be completed by mid-December 2012.

On 20 August 2012, it was announced that ASX-listed iron ore miner Cleveland Mining Company had formed a strategic alliance with ASX-listed BC Iron. The strategic alliance was entered into in order to acquire and co-develop new iron ore projects in Brazil as joint venture partners. As part of the strategic alliance, BC iron will acquire a 5% interest in Cleveland Mining through the issue of new ordinary shares at A$0.642 per share.

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