Atlas Iron has agreed to buy Warwick Resources for $65 million in stock to increase supply of the steelmaking raw material and improve its marketing strength.
Atlas offered one share for every three of Warwick’s, or 55.67 cents based on Atlas’ closing share price yesterday, the Perth-based company said today in a statement. That’s 20 per cent more than Warwick’s closing price yesterday.
Buying Warwick may add as much as 247 million metric tonnes of iron ore resources in the south eastern Pilbara region, close to the town of Newman, Atlas said. That may enable it to reach annual production of 26 million tonnes a year by 2014.
“Larger export tonnages mean lower fixed costs, better buying power, a significant increase in cash flow, stronger returns for shareholders and a more substantial business for the long term,” Atlas managing director David Flanagan said in the statement.
Atlas produces about 1 million tonnes a year from the Pardoo mine in Western Australia’s Pilbara. It has previously announced plans to expand output to 12 million tonnes by 2012.
The board of Warwick has recommended the offer.