Australian iron ore miner Mt Gibson bids for Aztec

Australian iron ore miner Mount Gibson Ltd. launched a scrip takeover offer on Monday for fellow miner Aztec Resources Ltd. , valuing Aztec at about A$200 million ($150 million).

Mount Gibson said a successful takeover would create an independent iron ore company with the potential to produce 9.5 million tonnes a year of hematite ore from 2009, and a potential market value of more than A$600 million.

Shares in Aztec jumped 12 percent to A$0.24 a share in early trade, while Mount Gibson was down nearly 4 percent at A$0.75.

The two companies are among about a dozen small iron ore producers that hope to rival industry giants BHP Billiton Ltd./Plc and Rio Tinto Ltd./Plc. , often with the backing of Chinese or Korean investors.

“The merged entity, which will be headquartered in Perth, Western Australia, will become a substantial pure-play iron ore producer on a world scale,” Mount Gibson said in a statement.

The combined group would have three hematite projects in Western Australia: Mount Gibson’s Tallering Peak, which is in production, and Mount Gibson’s Extension Hill and Aztec’s Koolan Island – both of which were close to production.

Mount Gibson said it would offer one of its shares for every three shares held in Aztec, which would value Aztec at about A$0.263 cents a share, based on Mount Gibson’s volume weighted average price on July 21 of A$0.789 a share.

This represented a 22 percent premium to Aztec’s closing price on Friday of A$0.215 a share.

Rio Tinto produced 33.3 million tonnes of iron ore in the second quarter alone. BHP will release its latest quarterly production figures on Tuesday. ($1=A$1.33)

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