Russia’s third largest steel producer Magnitogorsk Iron & Steel Works (MMK) has launched an Aus$554 million takeover offer for Australia’s Flinders Mines, which has recommended that its shareholders accept the offer as it will eliminate development risk with its iron ore project in Australia’s Pilbara region.

MMK is seeking foreign sources of iron ore in order to hedge against the possibility of rising prices on the open market and its offer of 30 cents a share represented an 82% premium to Flinders last traded price prior to the offer.

The MMK bid came a day after Japan’s Mitsubishi Corp offered to buy Murchison Metals’ stakes in another iron ore project and infrastructure in Australia for $315 million.

Flinders said in a statement that without the MMK buyout there was a 'significant risk' its mine would not be developed.

Flinders is one of several miners seeking to dig new mines in the Pilbara, where industry titans Rio Tinto, BHP Billiton and Fortescue Metals Group control much of the ground and infrastructure, such as rail haulage lines and port berths.

Flinders main project has a 20-year mine life and could produce up to 15 million tonnes of iron ore annually, starting as early as the end of 2012. By comparison, Rio Tinto mined more than 200 million tonnes of ore, BHP Billiton 155 million tonnes and Fortescue around 40 million tonnes in 2010. Roughly 70% of the world's seaborne-traded iron ore is controlled by Rio Tinto, BHP and Vale of Brazil.

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