# ARI - Arrium Limited



## System (3 July 2012)

Arrium Limited (ARI) was formerly known as OneSteel Limited (OST).

Previous discussion of this company can be found in the OST thread: https://www.aussiestockforums.com/forums/showthread.php?t=814


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## monaroman76 (8 July 2012)

Hey all, I am new to the forum and keen to learn a lot from the knowledgeable members.

What are people's opinions on this company? In my opinion, Onesteel was punished badly by the market due to lack of understanding about the structure of the business. The name change was a good decision by management, and perhaps now it can be understood that Arrium is much more than just a Steel manufacturer as the former name would suggest. The steel manufacturing sector of the business is set to make a positive EBITDA for the second half of 2012 for the first time in many years. The Iron ore export sector of the business has been the main driving force behind their profits for several years, now with the expansion projects to increase iron ore exports, they seem to be in a great position to increase profitability.
It is my opinion that the steel industry will turn around in Australia in the future, and Arrium will be in in a good position to take advantage of this, given all their efforts put in to reduce costs in their manufacturing business.

They are trading on a very low P/E at the moment. Does anyone else think they are heavily undervalued?


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## Knobby22 (8 July 2012)

Thanks for the heads up.
Having a look. Recycling is going bad. Very susceptible to high $A in all businesses.
As you say it is their Iron Ore exports that make all the money. May as well be not in other businesses at present.

Worth considering. I am personally scared that the $A will rise so am not that keen at present.
Definitely one to keep an eye on. 
Anyone else have an opinion??


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## oldblue (8 July 2012)

I'd be careful about putting too much store on the "mis-understood stock" angle. Brokers and institutions have been well aware of the nature of ARI's business - certainly now and, I suspect, well before the company started its name change campaign.

Factors to consider include:

- Trend of iron ore prices in the light of a probable peaking and decline in Chinese demand.

- Ore grades and extraction costs, particularly vis a vis the Pilbarra iron ore producers.

- Continuing flat demand for steel products and competitive costs of Indian and other Asian mills.

Disc: Not holding.


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## monaroman76 (9 July 2012)

Thank you both for the input.

I will be following closely to see the results from the FY report. The SP jumped significantly after the half yearly report on average results. I am assuming the market was expecting a profit result likened to that of BSL? Can any one shed any light on what caused the price to jump up by 40% in a matter of days?


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## Crows (22 August 2012)

Nice to see Arrium shoot up 9.5 cents from 0.81 to 9.05 in a single day yestersay. Some investor confidence seems to be emerging after Arrium released their business report.

Keeping an eye on this stock as it could be a bit of hype and merely a bubble.


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## Centaur (4 October 2012)

Members,
Seeking some opinion as on the following transaction.
I bought 7000 ARI a couple of weeks ago @ 0.595. Following takeover news this week shares have spiked somewhat. I took the opportunity to sell 4000 today @ 0.72 and bank some profit. Basis of decision was that if takeover potential falls away then SP may follow in same direction. My remaining holding potentially benefits if takeover offer is reviewed.
Happy with my decision with this trade however I am curious as to what others think they would have done.
Cheers
Centaur


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## skc (4 October 2012)

Centaur said:


> Members,
> Seeking some opinion as on the following transaction.
> I bought 7000 ARI a couple of weeks ago @ 0.595. Following takeover news this week shares have spiked somewhat. I took the opportunity to sell 4000 today @ 0.72 and bank some profit. Basis of decision was that if takeover potential falls away then SP may follow in same direction. My remaining holding potentially benefits if takeover offer is reviewed.
> Happy with my decision with this trade however I am curious as to what others think they would have done.
> ...




The general chatter seems to be that it is just the first offer and undervalues the business on a break-up basis. The mining supplies division is quite profitable, the iron ore division is at the mercy of the iron ore price, while the loss-making steel division needs an injection of technology that might turnaround its performance.

With the bidders being essentially trade buyers for various parts of the business, it feels like the "7 hair experts" coming in to "fix" the company.

The overall market is also enjoying a much healthier tone. Two other M&A deals today (DML and ACN) means that people are definitely less bearish.

Disclosure. I hold @ ~67c.

P.S. Not advice. Just opinions


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## notting (4 October 2012)

A risk might be that it is a strategic asset for steel making and could be seen as something against the interests of the country if it fell into foreign hands.  The only other one we have these days is BSL.
So an acceptable bid from a foreign entity, not a joke like this one, could be blocked at the national level.
Then again I guess the gov could put in all kinds of caveats to safe guard Ausi steel making capacity, which would probably put the buyers off any way.


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## noirua (4 October 2012)

BHP Billiton could make an offer of shares and more easily split the iron ore side away from steel manufacturing. They would have more cash to update the good sides of Arrium


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## qldfrog (4 October 2012)

noirua said:


> BHP Billiton could make an offer of shares and more easily split the iron ore side away from steel manufacturing. They would have more cash to update the good sides of Arrium



BHP? 
with all respect, are you kidding or what? BHP has no clue where to find the money it needs for its own profitable development...
China, maybe as a way to convert some US $ but not BHP


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## skc (4 October 2012)

noirua said:


> BHP Billiton could make an offer of shares and more easily split the iron ore side away from steel manufacturing. They would have more cash to update the good sides of Arrium




That would be pretty funny considering OneSteel was a spin off from BHP all those years ago.


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## yshima (5 October 2012)

up 8% today.


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## Crows (25 October 2012)

http://blogs.wsj.com/dealjournalaus...-revive-1-billion-takeover-talks-with-arrium/

*Posco, Noble Consortium Seeks to Revive $1 Billion Takeover Talks With Arrium*

Steelmakers Australia, a consortium led by Korean steel producer Posco 005490.SE -1.43% and commodities trader Noble Group Ltd. N21.SG 0.00%, sent a letter Wednesday to the board of Australian steelmaker Arrium Ltd. ARI.AU +3.21%, asking to re-engage, a spokesman for Steelmakers said.

The proposal ”” on which Steelmakers is seeking to base discussion ”” has not changed from the proposal it offered on Sept. 28 which outlined a 1 billion Australian dollar (US$1.04 billion) acquisition at 75 cents a share.

Arrium closed Wednesday at 80.5 cents a share, a 7.3% premium to the offer from the Asian consortium.

“It’s like sending the same letter twice,” an Arrium spokesman said. He added that there was nothing in Wednesday’s letter that hadn’t already been rejected by the board on Oct. 1. “This opportunistic approach comes at a time of volatile commodity prices and market conditions,” Arrium said at the time.

Steelmakers Australia’s initial proposal was conditional on factors including exclusivity during due diligence, arranging debt finance, regulatory approvals and recommendation from Arrium’s board.

There are other parties poised to join the Steelmakers Australia consortium, alongside National Pension Service of Korea, Korea Investment Corporation and Korea Finance Corporation, should a scheme of arrangement be agreed, a person familiar with the situation said Wednesday.

Analysts, including Morgan Stanley's MS +0.53% Philip Bare, believe the consortium can afford to lift its bid by as much as 20%, to 90 cents a share, which would value Arrium at A$1.21 billion.


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## notting (31 October 2012)

Revised bid still a joke.
Will they go directly to share holders after it tanks again?


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## pixel (20 February 2013)

Now that a top seems firmly established as resistance, we can use the new range for our next Fibonacci study. Let's see how far ARI may drop and at what level support is coming in. My experience suggests that 61.8% is more likely than 78.6%, but I'll keep an open mind and let the Market tell me which it'll be.
Two alerts set: Down to $1 and back up above $1.20.
No action needed in between. But let's also keep that old open gap in mind...


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## notting (20 February 2013)

Shorted it yesterday because I cannot believe that this and BLS have rallied like they have given the shocking results they have produced for the last 5 years.
BLS is worse in my opinion but is yet to turn.


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## pavilion103 (20 February 2013)

I got in at 0.98. Still holding.


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## monaroman76 (20 February 2013)

1H underlying NPAT actually beat most analysts expectations and was weighed down heavily by the weak Iron ore price in the first quarter. If Iron ore prices maintain current levels or close to, 2H profit will be significantly higher as Iron ore exports ramp up due to port expansion. It looks like ~5Mt of Iron ore will be exported in the second half and if average Iron ore prices for the half remain strong this will see a decent turn around for EBIT in the mining sector. Arrium will be running at a rate of 12Mt of Iron Ore exports by August 2013, making it the forth largest exporter of Iron ore in Aus.

Mining consumables has been steadily gaining pace and nearly matched minings EBIT for the first half. The other sectors of the business are essentially breaking even and don't look to turn a decent profit in the near future. If mining and mining consumables can carry Arrium through the hard times the Steel industry is currently facing, they could be well positioned in the future if domestic and international demand for steel picks up.

-I hold shares in ARI.


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## notting (20 February 2013)

monaroman76 said:


> If mining and mining consumables can carry Arrium through the hard times the Steel industry is currently facing, they could be well positioned in the future if domestic and international demand for steel picks up




Fair points.
Yet if you look at what mining services have done in terms of price movements over the last couple of days and Ore stocks this is fairly certain to continue weakness.
What is their cost of production relative to the others?
Doesn't matter how much they can ship it's how cheaply they can do it given the ramping up by RIO and others coming on tap.  Spose that might sustain the consumables.
The steel production should just be a write off otherwise it's just a running liability unless the government continues to support it.


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## skc (20 February 2013)

notting said:


> Shorted it yesterday because I cannot believe that this and BLS have rallied like they have given the shocking results they have produced for the last 5 years.
> BLS is worse in my opinion but is yet to turn.




Agree with you particularly about BSL. Sure there's short covering to be had but I am still scratching my head on the very different market response to ARI and BSL's results.


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## monaroman76 (20 February 2013)

notting said:


> Fair points.
> Yet if you look at what mining services have done in terms of price movements over the last couple of days and Ore stocks this is fairly certain to continue weakness.
> What is their cost of production relative to the others?
> Doesn't matter how much they can ship it's how cheaply they can do it given the ramping up by RIO and others coming on tap.  Spose that might sustain the consumables.
> The steel production should just be a write off otherwise it's just a running liability unless the government continues to support it.





Average loaded cost of Ore is ~AU$42/t
You certainly raise a good point about other companies ramping up their Iron Ore exports, as it seems ARI's profitability is heavily dependant on the Iron ore price.
The mining consumables business operates mostly off shore, the main operations are in the Americas and Asia.


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## piggybank (27 December 2013)

Is the stock going to break out of the ascending triangle in a positive way?


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## piggybank (30 December 2013)




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## skc (18 September 2014)

GFC style renounceable rights issue @ 48c.

The rights are tradable under ARIR ,currently with bids at 1c.

The headstock are trading at 42.5c.

WTF? I have never seen this happen before.

Can I shout these rights and buy the head and pocket 7c spread?


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## skyQuake (18 September 2014)

skc said:


> GFC style renounceable rights issue @ 48c.
> 
> The rights are tradable under ARIR ,currently with bids at 1c.
> 
> ...




People are very optimistic!
You'll probably get only 1c as I'm sure people won't be kind enough to exercise them to give you the 6c.

CDU had a similar thing back in Nov13, Was trading $1.7~$2, did a 1:6 raising @ $2.50 (but with a free oppie)
Too bad there's never any borrow on rights...


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## skc (18 September 2014)

skyQuake said:


> People are very optimistic!
> You'll probably get only 1c as I'm sure people won't be kind enough to exercise them to give you the 6c.
> 
> CDU had a similar thing back in Nov13, Was trading $1.7~$2, did a 1:6 raising @ $2.50 (but with a free oppie)
> Too bad there's never any borrow on rights...




I suppose there's a scenario where the head say goes bellyup before the end of rights trading.

Loss on rights long = -1c. Gain on head short = 40c.

But I'd put that in the highly doubtful basket... at least for the next 3 weeks.


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## pixel (18 September 2014)

skc said:


> GFC style renounceable rights issue @ 48c.
> 
> The rights are tradable under ARIR ,currently with bids at 1c.
> 
> ...




... and falling further. 




rotten timing, to come out with a plan on a day like this...


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## Craton (25 September 2014)

ARI (nee OST) and BSL. Wow, these two spin offs from the Big Australian have had a roller coaster ride to say the least. Makes sense to me now why BHP wants to spin off "Newco" as well.

Back to ARI. With the SP currently at $0.38 and the renon-rights ARIR at $0.002, where is the value in buying the  entitlement at $0.48? I just don't get it. Or perhaps I do.

ARI SP was around the $0.76 mark before the 1 for 1 announcement, so it sort of makes sense. If the SP was priced at 76c so to account for the 1 for 1 dilution then it stands to reason that 1/2 of 76 = 38. So in fact the 48c renon-rights are being offered to the mug punter, um, retail investor at a premium.

A quick look see through the offer booklet I didn't note any share numbers pre/post entitlement so I may be quite off the mark in my assumptions but dilution is a given. Still, as a long term holder is the offer worth the punt, um, take up?

About the only things going for it from my perspective are buying in at a low in the cycle and lowering the avg cost. So what to do?
>>>> walks off scratching head thinking of the future.


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## skc (25 September 2014)

Craton said:


> ARI SP was around the $0.76 mark before the 1 for 1 announcement, so it sort of makes sense. If the SP was priced at 76c so to account for the 1 for 1 dilution then it stands to reason that 1/2 of 76 = 38. So in fact the 48c renon-rights are being offered to the mug punter, um, retail investor at a premium.




What you are interested here is the calculation of TERP (theoretical ex-rights price). Because ARI is getting new cash to pay off debt, so while the number of shares increased by 2 fold, the share price doesn't just half. 

Here's a link on how that's done.

http://accounting-simplified.com/ifrs/ias-33-eps/basic/theoretical-ex-rights-price.html



Craton said:


> Still, as a long term holder is the offer worth the punt, um, take up?




Of course not! If you want to increase your stake in the business, you buy on market at 38c. You don't take up the rights @ 48c. Only charitable idiots would do that.


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## Craton (25 September 2014)

skc said:


> What you are interested here is the calculation of TERP (theoretical ex-rights price). Because ARI is getting new cash to pay off debt, so while the number of shares increased by 2 fold, the share price doesn't just half.
> 
> Here's a link on how that's done.
> 
> ...




Cheers skc. Appreciated.

TERP link is handy. I should be able to work it out from there.

You're last paragraph puts it so much more eloquently than I ever could.


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## Miner (26 September 2014)

Craton said:


> Cheers skc. Appreciated.
> 
> TERP link is handy. I should be able to work it out from there.
> 
> You're last paragraph puts it so much more eloquently than I ever could.






skc said:


> What you are interested here is the calculation of TERP (theoretical ex-rights price). Because ARI is getting new cash to pay off debt, so while the number of shares increased by 2 fold, the share price doesn't just half.
> 
> Here's a link on how that's done.
> 
> ...



Craton
As I saw SKC saved you at least 10 cents per share so he deserves at least 5 cents per share of your holding.
Plus more as ARI shares slide down on Monday and Tuesday and then like all iron ore shares with prices going down


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## Craton (26 September 2014)

Heh heh, good one Miner. I may be an idiot but am not a charitable one. : As pixel said, rotten timing on the part of ARI.

Still, pun intended, I ponder on the future of iron and commodities in general and how China plays into the equation as there are serious concerns there. My head scratching is over the quandary: Is it worth blowing powder now or is there more pain to come?

With the S&P500 and co. adjusting for the QE wind back I reckon I don't need a chart to tell me there's more pain to come. Any TERP valuation would seem to mean little in this pull back/bearish climate. No doubt though at some point a bottom must eventuate and hence the enticement to my contrarian ways.


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## Miner (27 September 2014)

skyQuake said:


> People are very optimistic!
> You'll probably get only 1c as I'm sure people won't be kind enough to exercise them to give you the 6c.
> 
> CDU had a similar thing back in Nov13, Was trading $1.7~$2, did a 1:6 raising @ $2.50 (but with a free oppie)
> Too bad there's never any borrow on rights...




Hey SkyQuake
Similar example is on ANG They floated and closed a much higher price of the rights only to be collapsed at less than half rights price . I was lucky to be rejected to get my rights just because I did not hold the shares as ex rights basis even after the closing of rights offer. I literally saved more than $1 potentially by depriving the rights. Felt good . Surely those ARI holders who did not exercise the rights and waited till end feeling very good.


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## kingink (13 October 2014)

More of a drop incoming? Oil predicted to keep dropping? Not looking good for now, although I read the offer will definitely succeed as it is backed by a bank??  bit of a novice...  not sure


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## Craton (13 October 2014)

kingink said:


> More of a drop incoming? Oil predicted to keep dropping? Not looking good for now, although I read the offer will definitely succeed as it is backed by a bank??  bit of a novice...  not sure




Latest news HERE


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## redcorvetteguy (12 July 2015)

Has ARI hit rock bottom yet?


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## Miner (14 July 2015)

redcorvetteguy said:


> Has ARI hit rock bottom yet?




Ha Ha - that is a joke for the month mate.
Has iron ore reached the bottom - No.
So ARI has more fathoms () to go down. Just wait for AGO. 
Look at FMG - how it is sinking. Compared to IMO Arrium is doing much better. The quality of their ore is far superior than many others and they have consumption base.
All the best.


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## pinkboy (17 February 2016)

Anyone have any comments on ARI?

Results out today.

I only ask because I contributed $1mil to their earnings last month with a purchase of one of their properties for my business. 

If the way they handled themselves before and during and subsequently after the transaction,  I have no doubts on their (cough cough) performance this year.

pinkboy


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## Knobby22 (4 April 2016)

Looks like they may go under.
Interesting comment you made pinkboy back in February.


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## Craton (4 April 2016)

Will a rejected $1 billion recapitalisation plan and rail upgrade keep ARI from going down the gurgler?

"Last month Prime Minister Malcolm Turnbull travelled to Whyalla to announce a significant rail upgrade would be brought forward that was expected to create a big order of steel from Arrium."

http://www.abc.net.au/news/2016-04-...t-arrium-gso-billion-recapitalisation/7296754

ATM, even the contrarian in me isn't touching ARI with a barge pole.


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## Knobby22 (4 April 2016)

Craton said:


> Will a rejected $1 billion recapitalisation plan and rail upgrade keep ARI from going down the gurgler?
> 
> "Last month Prime Minister Malcolm Turnbull travelled to Whyalla to announce a significant rail upgrade would be brought forward that was expected to create a big order of steel from Arrium."
> 
> ...




I don't know, its a beautiful graph since July 2013 when the price was 70 times higher. 
Looking at it you could say it was flattening and forming a base but this quote from a guy I know recently made me laugh:-
In technical analysis - 0 is not a support line.


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## pinkboy (4 April 2016)

[SUB][/SUB]







Knobby22 said:


> Looks like they may go under.
> Interesting comment you made pinkboy back in February.




Best you read my write up here:

https://propertychat.com.au/community/threads/my-commercial-purchase.7877/

Was a very 'trying' experience to get them to sign contracts.  The day after they signed, one of the Director signatories was axed.  


pinkboy


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## Knobby22 (4 April 2016)

pinkboy said:


> [SUB][/SUB]
> 
> Best you read my write up here:
> 
> ...




Good write up. How did your old.landlord getting someone else?


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## Craton (5 April 2016)

Knobby22 said:


> I don't know, its a beautiful graph since July 2013 when the price was 70 times higher.
> Looking at it you could say it was flattening and forming a base but this quote from a guy I know recently made me laugh:-
> *In technical analysis - 0 is not a support line.*




Heh heh, yeh...

From a management perspective I'd say the board has "screwed the pooch." 

@pinkboy. Thanks for sharing the link and the process. Must have been a real strain over the festival season but what a nice little outcome as reward for effort.


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## pinkboy (5 April 2016)

Craton said:


> Heh heh, yeh...
> 
> From a management perspective I'd say the board has "screwed the pooch."
> 
> @pinkboy. Thanks for sharing the link and the process. Must have been a real strain over the festival season but what a nice little outcome as reward for effort.




Its still a strain.  I have just worked 4 weeks in a row to move sheds and get my blast and paint chambers built and ready to go.  We have about 2-3 weeks work to catch up on.  So, more weekends at the shed getting jobs done and finishing touches on the blast booth.

Now Im beginning to think I could have waited and got the shed in a fire sale!  . Nah, I got it for a stellar price, and happy with the purchase.  Im actually going to work instead of avoiding the place!

pinkboy


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## notting (6 April 2016)

http://www.bloomberg.com/news/articles/2016-03-31/welcome-to-new-ice-age-as-top-china-mill-warns-of-steel-crisis

Not the best of industries at present according to some.


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## pinkboy (6 April 2016)

......and trading suspended.....

pinkboy


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## pinkboy (7 April 2016)

Boom!

http://mobile.abc.net.au/news/2016-04-07/arrium-enters-voluntary-administration/7306340

pinkboy


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## Craton (7 April 2016)

pinkboy said:


> Boom!
> 
> http://mobile.abc.net.au/news/2016-04-07/arrium-enters-voluntary-administration/7306340
> 
> pinkboy




Maybe, just maybe the admins might be able to turn the tide.

Feeling for Whyalla and the 1K ARI workers. 

@notting, yep, a long winter indeed.


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