In the beginning of last week, 10.6% of Mt Gibson Iron were bought by Shanghai Merchants, a Hong Kong trader whose major shareholder is Shougang Holdings, part of Shougang Steel Group – China’s third largest steel producer. The shares were sold by COL Capital, which is part of Hong Kong-based investment group Sun Hung Kai, for $41m ($0.85 a share). Shanghai Merchants is listed on the Hong Kong Exchange; it has a market capitalisation of $US150 million ($195 million), which makes the Mt Gibson purchase a significant transaction. It is substantial that the shares were hold in the names of Honest Opportunity Ltd. and New Fortress Investments Ltd., both companies incorporated in the British Virgin Islands.
Shougang is the company to which Mt Gibson in June sold its 73% interest in Asian Iron, which owns the Extention Hill magnetite project for $52,5 million. Later it was acquired by Sinon Investment Holdings, which exercised pre-emptive rights, and which is controlled by a wealthy trader, Andy Zang. Funds from the sale are earmarked for development of Mt Gibson’s nearby Extension Hill hematite deposit.
Sun Hung Kai already holds another 5% of Mt Gibson. In this case the Sun Hung Kai group may build its stake further, via the purchase of the shares of Aztec Resources and acceptance of the bid, only with the approval of Foreign Investment Review Board. However, the sale of the 10.6% of Mt Gibson removes any potential FIRB barriers or objections.
At the moment the purchase is subject to the approval of Shanghai Merchants’ shareholders. It is also subject to a rights issue by Shanghai Merchants, on terms and conditions which are acceptable to the company.