MGX - Mount Gibson Iron

[chansw]

China's Shougang will accept 65 pct iron ore price rise - official
03.06.08, 6:30 AM ET

http://www.forbes.com/markets/feeds/afx/2008/03/06/afx4738713.html

BEIJING (XFN-ASIA) - China's fourth largest steel firm, Shougang, is prepared to accept a 65 pct increase in the price of imported iron ore this year, said the company's general manager, Zhu Jimin.

Speaking at the meeting of the Beijing delegation to the National People's Congress, Zhu said that the China Iron and Steel Association had already accepted a 65 pct rise.

'We will also accept this rate,' he said.

Baosteel settled on a 65 pct price rise with the Brazilian iron ore supplier, Companhia Vale do Rio Doce (nyse: RIO - news - people ) (Vale). However, Vale's Australian counterparts, BHP Billiton (nyse: BBL - news - people ) and Rio Tinto, are believed to be seeking a premium of 5 pct as a result of the region's superior logistics.

He said that a 65 pct increase in iron ore prices would increase the company's costs by 350 yuan per ton.

Zhu said that all the world's steel producers were facing similar cost problems, not only as a result of iron ore price increases, but also because of rises in the price of coking coal.

He also said that Shougang was still planning to increase its stake in Australia's Mount Gibson Iron Ltd.

The company acquired a 19.7 pct stake in the mining firm in February. 'We have such a plan (to expand), but to what extent our stake will rise, I still can't predict,:' he said.

 

[rustyheela]

yeah, but what does it all actually mean? takeover, good / bad for the stock price? any thoughts anyone, coz as a mgx holder, ive got absolutely no idea!!

 

[jman2007]

yeah, but what does it all actually mean? takeover, good / bad for the stock price? any thoughts anyone, coz as a mgx holder, ive got absolutely no idea!!

Rustyheela,

Earlier post from arms. It also depends what timeframe you are talking about, 2-3 months or 24 months?

So if they have an association under the application by MGX they will have two choices, not proceed with the sale or launch a takeover bid and they will require 90% to reach compulsory acquisition. Remember that if MGX get the orders they are asking for the sale to Shougang cannot proceed so APAC will only hold their 20.3%, which will be the shareholding to launch their takeover from, not 40%.
If they get 50% they may have control of the company but the holder can still hold his shares, which has been beneficial to shareholders in the past.

Who knows what they are thinking, and they have been shown to be willing to pay a healthy premium to secure a company they want. Anything under $4.50 will not have legs.

I tend to agree with this line of thought,

Although a lot of wrangling and pain may have to be endured before investors are notified of the outcome. Zhu Jimin of Shougang is also hedging his bets here, hinting at a further increase in their stake in MGX, but to what extent?...well no-one knows yet.

If the transaction is deemed to be illegal, imo the "APAC-Shoungang Conglomerate" could potentially launch a hostile takeover bid to wrest control of the company once and for all, but purely speculation at this point. I believe this would have a positive impact on the sp, since as arms has pointed out, they will have to come forward with a very competitive offer.

But that is still a long way away.

jman

 

[laurie]

Well at least it will get us into the new financial year as far as capital gains tax is concerned but anything over $5 will make me a happy chappy rather hold but Chinese cash is king right now look at what happen to AED

cheers laurie

 

[arms]

Well any takeover talk is always good for a companies share price as investors expect a healthy premium to the current price. In the current market this talk is gold as it has helped MGX share price maintain a healthy price despite what can only be said to be a shocking market at the moment.

I have always held that whilst some great short term gain can be taken from a takeover the true value remains in the shareholder ownership and the plans in place by management to grow into a very profitable company, we have just reached the start of this point as indicated in the last qrtly.

This also helps capital gains as one can slowly sell the shares to suit ones capital gains situation in the forthcoming years, as a long term shareholder from 15 cents this is very attractive as a takeover at the moment would mean a six figure tax bill on this.

My take is that the Chinese do not wish for a takeover but a controlling interest so that they can reap all the benefits without the worries of outright ownership, plus they can see the company is on the right track in its present form. This is their current ploy in their recent purchase by using smoke and mirrors, will the TOV be fooled or will they see through it time will tell.

The only question to me that really matters is have they gone to far, have they now got MGX management offside and ruined a previous good working relationship? Whichever way the TOV rule can the two reform a relationship that will allow the company to run effectively, a major shareholder offside can have ongoing effects that do not benefit the company. One must remember that MGX have stated that the Chinese have not been very helpful in sorting this all out.

So the final washup I believe from all this will be that no matter which way the TOV rule a takeover bid will have to be made as the two parties will have more than likely a poor relationship and if the Chinese wish to control the company they will only be able to do it by a takeover. The other option is a split board and continual infighting at board level.

Time will tell, many roads to travel and at the end of the day lets all hope that whichever way it heads it is a profitable outcome for shareholders.

Arms

 

[chansw]

The good news from Merrills

Shareholder change should be ignored for now​

Shougang’s proposed purchase of 19.7% stake in MGX, if combined with 22% in which they also have an interest, could mean that Shougang is forced to bid $2.81/sh. At this stage, we do not believe that Shougang intends to bid for theminorities. We also believe the MGX board will seek to minimise Shougang’s influence, in the absence of a full bid at a price reflection a control premium.​

We have upgraded earnings on the quarterly report​

Operationally the company is very strong, with production above our expectations, H1 profit of $32m ahead of our $25m, entirely on revenue, due to elimination of Geraldton selling discount. The production report included the unaudited H1 NPAT but no other data. We believe the main difference was currency hedging and the end of the Geraldton price discount.​

Earnings forecast changes​

FY09 up 4%, FY10 up 2.7%, FY11 up 2.4%.​

Price target to $3.60/sh​

Our price target represents 10.5 x FY09E EPS, and a 20% premium to our NPV, which we believe is justified because of the scarcity of iron ore pure plays, and the upside potential to our current iron ore forecasts.​

MGX is clean leverage to the iron ore settlement​

Iron prices looking strong, and contract price expectations continue to rise. A 70% iron ore price increase puts the company on 5.9x in FY09, and 3.6x FY10, and we recommend purchase for leverage to above expectation​

There was an update from Merrill Lynch yesterday.

The broker has made material changes to commodity price forecasts, as well as changes to A$ and cost forecasts.

Earnings change by +3%, +5%, and +23% in 08-10.

Target price is $4.00

The company's fiscal year ends in June. Merrill Lynch forecasts a full year FY08 dividend of 6.00 cents and EPS of 16.00 cents.

 

[shinobi346]

Takeovers Panel have put a halt on the transaction while they do further investigations of the relationship between the two chinese companies.

 

[chansw]

An Opportunity In Mt Gibson?
FN Arena News - April 02 2008

By Greg Peel


Mt Gibson Iron (MGX) currently enjoys a 3/2/0 B/H/S ratio in the FNArena database, and an average target of $3.90 against a last trade of $2.92. Brokers are keen on Mt Gibson because (a) it is an iron ore producer, (b) it has excellent, capital-efficient production growth, (c) it is an iron ore producer, (d) it is trading at an attractive multiple and (e) it is an iron ore producer.


Recently Mt Gibson has been held back however, in the context of a weaker market but also due to some share registry shenanigans.


At the beginning of February a subsidiary of Chinese company Shougang purchased the 19.7% stake in Mt Gibson held by Russian company Gazmetall. The purchase price was $2.60, which was about where the stock was trading at the time. The problem was that another Chinese company - APAC - holds a 22.2% stake in Mt Gibson, and Shougang has a significant stake in APAC. Thus it could be argued Shougang had "backdoored" a stake of almost 42% without satisfying the usual takeover rules.


And that's how the Australian Takeover Panel saw it. Yesterday the Shougang purchase was cancelled. The decision provides various pros and cons.


Firstly, on the pro side, if Shougang had been allowed to keep its stake the risk was Mt Gibson senior management and independent directors would have walked. One presumes they'll stay put for now.


Secondly, the possibility arises that Shougang might decide now just to go for a full bid and be done with it. In this case a "control premium" would need to be added to the offer price. While Shougang has previously indicated it was not interested in 100%, a week is a long time in the market. Analysts are split between those assuming no full bid and those suggesting it's not beyond the realms.


If the above does not occur, Shougang could still satisfy the rules by "creeping" up its stake by 3% every six months. This would put a floor under the stock price, but is not as immediately positive.


On the con side, Shougang may yet challenge the takeover panel ruling, which means a longer period of uncertainty.


Secondly, if Shougang decides to leave it all alone then the Gazmetall stake of 22% still overhangs the market, leaving little scope for the share price to rise in the short term.


Put this all together, and the analysts largely believe an investment in Mt Gibson is a good bet. Iron ore aside, an investor would be buying into a chance of a takeover or, if that's not to be, the Gazmetall overhang will keep a lid on the price, resulting in a cheap buying opportunity. If Gazmetall sells into the market it is a good chance for investors to pick up a stock that has largely been illiquid up to now. And when the sell-down is complete, there will be little holding the share price back.


Or Gazmetall might find another single buyer.


Whatever the outcome, it would seem an investment in Mt Gibson now has little downside, other than the opportunity to average up for the clearance of the Gazmetall stake.

 

[Mofra]

Firstly, on the pro side, if Shougang had been allowed to keep its stake the risk was Mt Gibson senior management and independent directors would have walked. One presumes they'll stay put for now.


Secondly, the possibility arises that Shougang might decide now just to go for a full bid and be done with it. In this case a "control premium" would need to be added to the offer price. While Shougang has previously indicated it was not interested in 100%, a week is a long time in the market. Analysts are split between those assuming no full bid and those suggesting it's not beyond the realms.


If the above does not occur, Shougang could still satisfy the rules by "creeping" up its stake by 3% every six months. This would put a floor under the stock price, but is not as immediately positive.

Could find out very soon given MGX is now in a trading halt. Only worry is after the AZR hostile takeover some form of "bourse karma" could force Shougang's hand rather quickly. As a further flow-on from the recent iron ore negotiations (read: RIO standoff) a greater proportion of Aussie hemetite will find its way onto the Chinese spot market (where prices are much higher) which will make it cheaper for the Chinese to buy controlling stakes in mid-cap Australian producers.

 

[laurie]

mmm this is like a soap opera playing out in front of use the problem is most of it is being played behind closed doors so guessing an outcome could come up with multiple results even picking a takeover figure would at best be pie in the sky

cheers laurie

 

[BankRoller]

Anyone have any ideas as to what is going to happen with respect to Russian Billionaire Usmanov to Sell Mt. Gibson Stake?

Will it give the Chinese an opportunity to make a bid if USmanov sells his stake?

 

[chansw]

Anyone have any ideas as to what is going to happen with respect to Russian Billionaire Usmanov to Sell Mt. Gibson Stake?

Will it give the Chinese an opportunity to make a bid if USmanov sells his stake?

Miner avoids back-door takeover
Jamie Freed
April 4, 2008

http://business.smh.com.au/miner-avoids-backdoor-takeover/20080403-23ie.html

MOUNT GIBSON IRON celebrated its third victory of the week yesterday when the Russian steel maker Gazmetall sold its 20 per cent stake in the West Australian iron ore miner through an institutional bookbuild rather than to a potential predator.

On Tuesday the Takeovers Panel knocked back Gazmetall's attempt to sell the holding to Shougang on the grounds that the Chinese steel maker was associated with another major Mount Gibson shareholder, Hong Kong's APAC Resources. Mount Gibson and other investors feared Shougang's purchase of the $410 million stake would be takeover by stealth.

But the panel did not comply with Mount Gibson's request to have the 20 per cent holding vested with the corporate regulator and sold to institutions through a bookbuild, so there were still worries it would be sold to another potential predator. Shougang soon announced it no longer planned to buy the stake.

Merrill Lynch yesterday conducted a bookbuild on behalf of Gazmetall with a price range between the planned $2.60 sale price to Shougang and Mount Gibson's closing price of $2.93 on Wednesday.

Before offers closed at 5pm yesterday, the managing director of Argo Investments, Rob Patterson, said his company was trying to obtain more Mount Gibson stock. "Those shares have been quite a bit higher [in the past]," he said. "We quite like the outlook for the company."

An analyst at UBS, Glyn Lawcock, this week said an open market sale of Gazmetall's stake would be positive in that it would increase the liquidity of the tightly held stock.

Since the US miner Cleveland-Cliffs bought most of Portman Mining in 2005, Mount Gibson has become Australia's largest independent iron ore miner.

 

[arms]

Trading in a tight band since the trading halt, tommorrow may see a good top up chance.

With IO price increase nearing settlement, increasing production, top management things for the future look great.

Some big bids coming through, 700,000 on the close on Friday anything is possible, takeover probably more likely now than ever.

Arms

 

[BankRoller]

http://uk.reuters.com/article/oilRpt/idUKA581620080427
good to see mgx up 6% today. perhaps the above article had something to do with it.

 

[Agent 86]

Just a couple of points on this stock -

1. When is it expected that goverment approval for MGX's Extension Hill mine will be made?

2. Who has MGX been linked with in respect of corporate activity?

3. Is anyone getting a bit bored with their story?

 

[TheAbyss]

Anyone have a theory on what is happening wiht the Sp on MGX? I am aware that commodities in general have fallen somewhat however io would have thought IO was still a happy place to be?

 

[speculator101]

Hi Agent 86 and Abyss.

I am most def not an expert, but I have spoken to people recently that have followed this company from the start... IPO etc.
The biggest reason for the drop is the many holders hoping for a takeover that might have happened last year, but like MCC, it now has two large corporate shareholders, and neither wants to sell to the other... so there goes T.O premium.
Then there is the future funding requirements... which I might add, will be paid for in cash through current production for 2009 and beyond.
They have debt, but under %7 of companies worth... and yes in the current hysteria in the U.S and debt issues... not a positive.
Then there is the issue of MGX actually ramping up production to what they have been aiming for.
Oh, last one: After their successful takeover of AZR (which they got for an absolute bargain) they have consistently argued that they are after more acquisitions... – this would most probably be done through script…
however, many would like them to get to 10Mill tonnes a year before doing anything hasty.
If... If.. Iron Prices continue to rise as they are being forecast to do until 2011... and yeah, believe me when I say I take every word from the brokers, with a ton of salt, then MGX will recover, and well.. JBwere values them at $4.50...... soo.... but you just have to look at Fortescue and see the similarities in regards to their current fortunes.
Sorry this is long winded, but there is very little discussion on a company that I started buying into 4 years ago... and have continued to buy...
IMHO, and a believer in the long term value of MGX.
goodluck to all holders.

 

[laurie]

And that's why no dividends have been paid,priority is given to expansion or acquisitions if these fall through expect to see money returned to shareholders next year if they offered me .8c-.10c I be very happy

cheers laurie

 

[nunthewiser]

And that's why no dividends have been paid,priority is given to expansion or acquisitions if these fall through expect to see money returned to shareholders next year if they offered me .8c-.10c I be very happy

cheers laurie

LOL well with an average holding at 18.4 cents i,s be more than happy with that scenario laurie , good solid co , thinks just market weakness stopping it in its tracks ...... and a big gday to speculator greeetings from geraldton long time no see

 

[Mofra]

LOL well with an average holding at 18.4 cents i,s be more than happy with that scenario laurie , good solid co , thinks just market weakness stopping it in its tracks ...... and a big gday to speculator greeetings from geraldton long time no see

This is turning into quite the little circa-2005 MGX reunion isn't it

On the acquisition front, the company did indicate a while ago they wouldn't strictly stick to Iron Ore, although chances are they would still prefer to deal in bulk commodities. Have to wonder who would appear to be a juicy enough target in the current circumstances, considering the softness in MGX scrip and the cost of expanding their credit facilities in readiness of a takeover/offer