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Atlas Iron Ltd., an Australian iron ore producer, announced today they had agreed to buy Aurox Resources Ltd. for $143 million in shares. The deal will see Atlas with increased ore resources and port capacity.
Perth-based Atlas say they will offer one of its shares for every three of Aurox. The merged entity would create an iron ore miner with a combined market capitalisation of $1.13 billion.
Aurox shares jumped as much as 152 percent to 68 cents in Sydney trading, the highest since August 2008, after the announcement.
Atlas has been in pursue of other several takeover targets last year, including juniors Warwick Resources and Hannans Reward to increase scale to support infrastructure in the region.
Atlas also agreed to advance an interest-free loan of $13.86m to Aurox so the junior could pay a charge to the Port Hedland authority, and in return Atlas would have first right to use any of Aurox's unused or surplus berth, ship loading and ore stockpiling capacity at the port.
Atlas produces iron ore from the Pardoo project in Western Australia's Pilbara region, where majors BHP Billiton and Rio Tinto monopolise the port and rails and refusing to allow third party access. With the acquisition of Aurox, Atlas will be able to unlock as much as 12 million tons a year in port capacity at Port Hedland, the company said.
"Whether you are in Hunter Valley coal or Pilbara iron ore it is all about resource quality, infrastructure access and economies of scale," Atlas Iron managing director David Flanagan said.