Limousine rental services firm and copper miner, Wah Nam International saw its share price fall 5.9 per cent yesterday after rising on Thursday following its proposal to take over two iron ore miners in Western Australia for HK$7.65 billion.
The two miners face challenges in pulling off their projects as they have to negotiate with bigger rivals BHP Billiton and Fortescue Metals Group (FMG) for rail access.
Wah Nam on Wednesday said it was offering to buy all the shares it did not already own in Brockman Resources for HK$5.91 billion, and shares it did not own in FerrAus for HK$1.74 billion. It already owned a 22.6 per cent stake in Brockman and a 19.9 per cent stake in FerrAus.
The offer for Brockman shares is at a 42.8 per cent premium to the closing price on Tuesday, and that for FerrAus, a 52.2 per cent premium.
Although the combined iron ore resources of the two miners amounts to 1.8 billion tonnes, at least 1 billion tonnes is of mediocre quality with iron content of 42.4 per cent, according to Wah Nam.
Content of less than 50 per cent was considered mediocre, said UOB Kay Hian Securities analyst Helen Lau. Additional investment on processing facilities was required to turn such ore into higher-grade one.
