Atlas Iron’s ace-in-the-hole stake in the North West Infrastructure joint venture has begun to slip through its fingers, as officials may not green light proposed port development.
Atlas Iron (ASX:AGO) has been receiving attention from notable investors, but the tide may now be turning for the Australia-focused company.
The iron ore miner said on Thursday (June 14) that according to the Western Australia government it does not have priority rights to development at Port Hedland.
The company is caught in a three-way tug of war between Mineral Resources (ASX:MIN), Fortescue Metals Group (ASX:FMG) and Hancock Prospecting, with many market watchers saying the company’s access to Port Hedland is the draw.
Atlas holds a joint venture interest in North West Infrastructure (NWI), located on the southwest side of Port Hedland’s inner harbor, and wants to develop two new port berths there.
Currently NWI’s export capacity stands at 13 million tonnes per year via a single port, and the expansion would take its capacity up to 50 million tonnes annually.
In April, Atlas agreed to merge with Mineral Resources, saying that together the companies would be able to “exploit greater synergies and economies of scale,” allowing them to lower their costs.
The plan was supported by the Atlas Iron board of directors, and touted by both companies as a way to protect Western Australian jobs. It was due for completion in August.
A wrench has been thrown into that plan in recent weeks, with mining bigwigs Gina Rinehart of Hancock Prospecting and Andrew “Twiggy” Forrest of Fortescue Metals jumping in to take major stakes in Atlas.
Respectively, they snapped up 19.96-percent and 19.9-percent stakes in Atlas. At that level, they are now able to block the merger between Atlas and Mineral Resources. In narrowly dodging the 20-percent mark, neither company is forced to make a bid for all of Atlas’ shares.
As mentioned, it’s rumored that both Rinehart and Forrest are interested in Atlas’ Port Hedland access. It’s also been suggested that they may be participating in “defensive maneuvering.” The Sydney Morning Herald notes that the magnates may be concerned about “the rise of Mineral Resources” and do not want to see it gain port access via Atlas.
In addition, they may be worried that they will be hurt if the combined Atlas/Mineral Resources entity bumps up iron ore production.
Of course, Thursday’s move from the government throws access to Port Hedland into question.
Western Australia Transport Minister Rita Saffioti told Atlas that the berths it wants to develop are reserved for junior miners. Additionally, Saffioti said assessment will fall to the Pilbara Ports Authority, leaving both the company and status of the joint venture in uneasy uncertainty.
Experts have pointed out that neither Hancock Prospecting nor Fortescue Metals can be considered junior miners, “meaning the ruling could have ramifications for the two companies if they have hopes of acquiring extra port capacity via this future project.”
Shares of Atlas initially jumped over 60 percent following the Hancock and Fortescue investment news, but closed 18.2 percent lower after the government pass off went public.
Following a brief trading halt on Thursday, Atlas responded to Saffioti’s message by saying it was “contrary to the previous stated position of the Western Australian government.”
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.