Byrne Endorses Bid For Aztec

Sydney Morning Herald

Tuesday July 25, 2006

Barry FitzGerald

JOHN BYRNE'S London-listed Cambrian Mining - soon to list in Australia - has emerged as the king-maker in the long-awaited consolidation and rationalisation of Western Australia's junior iron ore companies.

Cambrian has thrown its weight behind Mount Gibson's scrip-only takeover bid for a reluctant Aztec Resources which, if successful, will create a new $600 million iron ore force producing more than 9 million tonnes a year of the key steel-making raw material.

The market speculated yesterday that success by Mount Gibson could be followed with a scrip offer by the merged group for another iron ore junior, Gindalbie.

Mount Gibson is to offer one of its shares for every three Aztec shares. Based on Mount Gibson's closing price before the bid was announced, the offer valued Aztec at 26.3c a share. But on yesterday's closing price for Mount Gibson of 75c, the offer was worth 25c an Aztec share compared with its closing price of 24c, up 2.5c on the day.

Aztec owns the Koolan Island project, which is now being developed and has a target production capacity of 4 million tonnes a year of iron ore. The group intends fighting the offer, saying yesterday its timing was opportunistic.

Cambrian owns about 35 per cent of Aztec. Mr Byrne said from London yesterday that the group fully supported the Mount Gibson move. Mount Gibson has secured an option on 19.9 per cent of Aztec held by Cambrian.

Assuming a rival bidder does not emerge, Mount Gibson would be able to count on Cambrian accepting for the remainder of its holding.

"As a 35 per cent shareholder, we fully endorse it," Mr Byrne said. "We think it is a great strategy. We are committed to seeing this work."

Cambrian would be the main shareholder in the merged group, with a 15 per cent shareholding. Mr Byrne indicated that the 15 per cent would not be the stopping point.

"As with everything in Cambrian, we aren't in these things to be a minority shareholder," he said. "We will go to a higher position or we will exit. That is going to depend, to a large extent, on our shareholders.

"This is a solid foundation for growing a serious iron ore group," he said, referring to the merged group's substantial production capacity potential and its minimal debt position.

He said the scarcity of professional and skilled workers could not be underestimated as a driving force behind the need for mergers.

© 2006 Sydney Morning Herald

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