WPG Resources sells iron ore assets to OneSteel

Monday, 22 Aug 2011

OneSteel Ltd has bought iron ore assets in South Australia including Peculiar Knob from WPG Resources Ltd for AUD 346 million, as it focuses more on iron ore exports.

OneSteel will also expand its export port facilities at Whyalla in SA to 12 million tonnes per annum by the fourth quarter of calendar 2012, from the current capacity of 6.5 million tonnes to 7.0 million tonnes, the company says.

The port expansion will cost about AUD 200 million.

The proposed sale of WPG Resources iron ore assets represents a return on WPG’s iron ore investment of AUD 70 million of about 400% and equivalent to AUD 1.40 per share in a market where cash is king. WPG will distribute the after-tax proceeds of the sale to shareholders upon requisite approvals.

The transaction will deliver a distribution of cash that exceeds WPG’s current share price, with the additional benefits of franking credits.

The transaction will be effected by the sale of WPG’s subsidiaries Southern Iron Pty Ltd, Central Iron Pty Ltd and Coober Pedy Resources Pty Ltd on a cash and debtfree basis.

Southern Iron’s principal project assets are the Peculiar Knob mining lease and the Buzzard mineral claim and all of the approvals and tenements in the Coober Pedy area necessary to develop the Peculiar Knob project. Central Iron owns the Hawks Nest exploration licence, while Coober Pedy Resources owns the Mt Brady and Windy Valley tenements.

The sale does not include WPG’s subsidiary Spencer Gulf Ports Pty Ltd which owns land in Port Pirie and the right to develop a bulk commodities export facility pursuant to the development consent previously announced. Neither does it include Southern Coal Holdings Pty Ltd, the joint venture vehicle with Evergreen Energy Inc that owns the Penrhyn and Lochiel North coal deposits and which has the exclusive rights to use Evergreen’s coal upgrading technology in Australia for the first 15 mtpa of product coal from any project, not just from tenements that it currently holds.

The sale is contingent on a number of items including approval by WPG’s shareholders. In the absence of a superior proposal
1. WPG’s Board will unanimously recommend that WPG’s shareholders vote in favour of the sale; and
2. Each director of WPG will vote (or procure the voting) of all shares held or controlled by him or her in favour of the sale.

The general meeting of shareholders that will be convened to consider the sale will be held on or about 4 October 2011.

The Company’s iron ore deposits lie in the Peculiar Knob and Hawks Nest tenements in the Gawler Craton south of Coober Pedy with a resource of 19.2 million tonnes at 64.0% iron that the company intends to bring into production in 2011 at a rate of 3.3 million tonnes per year for an approximate five year mine life. The coal projects are located in the Coober Pedy region and in the southern part of SA at Lochiel and Pidinga.

(sourced proactiveinvestors)