Grange Roadshow Gets Bumpy Ride
The Age
Tuesday September 30, 2008
AN EASTERN states roadshow by magnetite group Grange Resources on the benefits of its proposed merger with the Chinese-controlled Australian Bulk Minerals (ABM) has got off to a good start. But Grange's share price has nevertheless been pummelled.
Word that there was distressed selling by a US hedge fund of a small shareholding (1.25 million shares, or 1.08%) in Grange sent the shares down 37, or 21.7%, to $1.33 ahead of a trading halt pending an announcement on a possible sale of one of the group's non-core assets.Grange managing director Russell Clark said that talk of the hedge fund seller was all that he could put the share price hit down to, given the generally warm reception last week's merger proposal was receiving.What concerns there were with the deal mainly related to its dilutive impact on Grange, the owner of a 70% stake in the $1.6 billion Southdown magnetite project near Albany in Western Australia.Under the terms of the proposed merger, the mainly Chinese steel-making and steel-trading shareholders in the unlisted ABM will own 73.9% of the merged group and Grange shareholders 26.1%.Mr Clark said that he had been highlighting to investors that Grange would become a producer under the deal, given ABM's ownership of the Savage River magnetite operation in Tasmania.Due mainly to earnings from Savage River, the merged group would be looking at December-half (2008) earnings before interest, tax and depreciation of $80-90 million.Mr Clark said that it also had to be realised that in the current equity market, a stand-alone Grange would have trouble financing its $450 million equity share of an equity/debt financed Southdown development.The deal with ABM delivered cash-flow and a supportive Chinese shareholding base that has access to Chinese funding sources.The main ABM shareholder, Shagang, is China's biggest private steel maker.LINK? Read more on ABM at tinyurl.com/4h3jzc
© 2008 The Age