Monsters of Rock: China’s back in business and iron ore prices are climbing
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China’s steel industry has returned from Lunar New Year festivities with a bang, with soaring iron ore prices leading to big gains in the ASX’s materials sector.
Iron ore prices hit US$149.40/t on Monday with further gains in the futures market today signalling bright fortunes in the days ahead.
The most traded Dalian iron ore contract for May was up 2.21% to US$130.49/t today, while Singapore futures for March were 1.53% higher at US$149.70/t.
Iron ore has not been in such positive territory since early September.
According to MySteel, China’s steel output was down in late January at 2.5Mt per day after rising continuously for a month, in line with the general Chinese New Year slowdown, but it expects steel prices to rise this month coming out of the public holiday.
Fortescue Metals Group (ASX:FMG) was up 3.25% to $22.23, its strongest share price since mid-August.
Rio Tinto (ASX:RIO) (up 2.17%), AngloGold Ashanti (ASX:AGG) (up 2.45%) and lithium explorer AVZ Minerals (ASX:AVZ) (up 5.92%) were among the top performing resources stocks as the materials index paced the ASX 200 with a 2.2% lift.
The sector index is now up 6.88% over the past five trading days.
Australia’s Takeovers Panel has delivered another twist in the three-cornered saga brewing between mid-cap gold miner Emerald Resources (ASX:EMR), public unlisted junior Bullseye Mining and its disgruntled Chinese shareholder Hongkong Xinhe International.
Xinhe, which holds almost 15% of Bullseye’s stock, has used a vehicle called Au Xingao to announce a planned cash bid it believes represents a premium to Emerald’s $117 million all-scrip offer for the owner of the North Laverton gold project, once a $4 million target for King of the Hills gold miner Red 5 (ASX:RED).
It has been successful in getting the Takeovers Panel to make a declaration of unacceptable circumstances in relation to the Emerald bid on Monday night.
The panel found deficiencies in Emerald’s target statement and a number of factors that had a limiting effect on the ability for a competing proposal to be made.
Importantly Emerald, which hoovered up 55.87% of Bullseye’s stock before the Takeovers Panel began its deliberations, will have to offer withdrawal rights to Bullseye shareholders who have accepted the offer to date.
The company, which is trying to expand beyond its 100,000ozpa Okvau mine in Cambodia, said it will comply with the orders, which also include dispatching a supplementary bidder’s statement explaining the effect of the Panel’s declaration and details of how exercise to withdrawal rights and extending the closing date of the offer, currently due to expire on Friday.
“We respect the Takeover Panel determination and are pleased we now have a process we can work through to achieve our goal of creating an expanded gold exploration, development and production company, with a diversified portfolio of highly prospective gold project areas which provides an attractive investment proposition for existing and new shareholders of the Company,” Emerald MD Morgan Hart said Monday.
Bullseye on Monday noted the Au Xingao bid was “not a bid but rather a statement of intention to make a bid in the future” and that the only live bid at present is the recommended takeover made by Emerald.
“The Bullseye board is in the process of considering Xingao’s intended offer and the Bid Intention Announcement generally and will update Bullseye shareholders once it has done so, including providing an appropriate recommendation to shareholders in due course.”
According to the bid intention announcement Au Xingao will offer 31c cash for every Bullseye share, increasing to 35c if it receives the opportunity to complete due diligence and claims 40% of Bullseye’s stock.
“This is an excellent outcome for all Bullseye shareholders, who now have the option to consider our all-cash off-market takeover offer for Bullseye for up to $0.35 cash per share,” Au Xingao director Luke Huang said in a statement.
“Our all-cash offer is clearly superior to Emerald’s scrip bid. Now Bullseye shareholders who had previously accepted the Emerald bid have the chance to withdraw from that offer and reconsider the alternative proposals that are now on the table, or that might emerge in future.
“We are confident that our premium, cash-in-hand bid will prove significantly more attractive for Bullseye shareholders than the risk of accepting Emerald scrip and potentially seeing the value fall.”