Holiday news 1: global natural resources

Comment

Given the dearth of news over the holidays, it is clear that the natural resources sector had its feet up (and in Queensland, they were very wet ones). The exceptions were those nice people at: Baffinland (which is being pursued by rival suitors, Nunavut and ArcleorMittall); and Riversdale (which has agreed to be bought by Rio Tinto). But neither situation is a slam dunk at this time. In other news, too, note the highest December iron ore exports from Brazil in three years. “Happy New Year”


Nunavut raises offer for Baffinland to C$1.45/C$ 570 million - above ArcelorMittal

Nunavut Iron Ore Acquisition Incorporated raised its hostile bid for Canada’s Baffinland Iron Mines to C$1.45 ($1.46) a share, thereby beating ArcelorMittal’s offer of C$1.40. Nunavut, a venture formed in August to gain control of Toronto-based Baffinland (and backed by private equity group Energy and Minerals group or EMG), is seeking to buy 60% of the Company. However, Baffinland was last seen $1.52 in OTC trading in New York.

Nunavut’s bid raises the odds in a three month takeover battle for Baffinland’s Mary River iron ore project in Canada. ArcelorMittal, the World’s number one steelmaker, last week increased its semi-agreed bid for all of Baffinland’s shares to C$551 million. Both offers expire on 10 January.

ArcelorMittal said its bid “remains superior to Nunavut’s coercive partial bid” and the Nunavut offer “carries significant uncertainty for Baffinland shareholders”. Similarly, Baffinland, itself, said shareholders should accept ArcelorMittal’s offer. The Nunavut group already owns about 10.5% of Baffinland’s shares. However, the latter’s largest shareholder, Resource Capital Funds, based in the US and Australia, has agreed to tender its 23% stake to ArcelorMittal. Directors and managers have also tendered another 2.4%.

Mary River, which lies in the Arctic Circle, could initially produce 18 million metric tons of iron ore annually - starting in from 2013, according to Baffinland in November. The cost has been put at C$4 billion for an estimated 365 million tons of reserves.

The competition to win control of Baffinland underlines the popularity of iron ore assets worldwide at this time.


Riversdale agrees increased $3.9 billion Rio bid

Rio Tinto has offered $3.9 billion (£2.5 billion)to buy African coal miner, Riversdale, in an agreed deal which is likely to be challenged by rivals seeking to secure coking coal reserves. Rio’s first big proposed acquisition since its unsuccessful bid to buy Alcan in 2007 is a plan to benefit from rampant Asian demand for the key steel making ingredient. But it needs the backing of at least one of Riversdale’s three large shareholders, including India's Tata Steel and Brazilian steel group CSN.


Brazil iron ore exports in December jump to highest in almost three years

Brazil’s iron ore exports in December jumped 33% to the highest volume in almost three years, according to the Country’s Trade Ministry. Shipments totalled 32.2 million metric tons, the most since May 2008, when exports were 35.1 million tons.