Aurox and Atlas Iron set to merge
Aurox Resources Limited (AXO) and Atlas Iron Limited (AGO) have agreed to merge via scheme implementation agreement (“SIA”) that would see Aurox shareholders receive one Atlas share for every three Aurox shares held. Aurox said the merger implies a price per Aurox share of $0.74 based on Atlas’ last closing price of $2.21, representing a premium of 173% on Aurox's last share price of 27c.
The junior iron ore developer said its board has unanimously recommended that, in the absence of a superior proposal, all Aurox security holders vote in favour of the scheme.
Aurox said the merger provides its shareholders the opportunity to participate in Atlas’ rapidly growing production profile, which will position the company as a globally significant iron ore producer.
The company said the merged company would have 187 million tonnes (mt) of DSO resources, exploration targets of 430 to 750mt at 57% to 60% Fe, two Pilbara magnetite projects and a 15,000 square kilometer Pilbara landholding, and a DSO production target of 26mtpa by 2014.
Managing Director of Aurox, Charles Schaus, said the high premium offered by Atlas is a great deal for Aurox shareholders.
”It reflects the high potential of the Balla Balla project, Aurox’s access to infrastructure and regionally significant water resource,” Mr Schaus said.
“The merged group’s port capacity of up to 33mtpa will allow the company to generate substantial synergies from production and development schedule optimization.”
He added that with iron ore prices expected to increase significantly in the coming year, the merger would give Aurox shareholders the opportunity to share in the benefits from immediate cashflows.
As part of the SIA, Atlas has agreed to extend an unsecured, interest-bearing loan of up $7.7million to Aurox in order to enable Aurox to redeem the outstanding convertible notes which are due to mature on 30 June 2010.
Aurox said the loan would be repayable on the earlier of four months from the date of draw down and 20 business days after termination of the SIA.
The company said the scheme would be subject to customary conditions for a public transaction including shareholder, court and regulatory approvals.
Aurox said the parties have agreed that unless the SIA is terminated, Aurox would not solicit any competing proposal or participate in any discussions or negotiations in relation to any competing bid.
As at 1017 AEDT Aurox and Atlas shares were halted at 27c and $2.21 respectively.
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