ConsMin sells $111m stake in Pilbara's BC Iron
The $111 million transaction was completed on Thursday night and has delivered a handsome pay day for ConsMin, which is controlled by Ukranian billionaire Gennadiy Bogolyubov.
The buyers are unknown at this stage, but BC believes a mix of big institutional investors have paid $3.90 per share via a sale process run by Macquarie.
The stock was fetching $4 on Friday afternoon, well below its record high of $4.50 on Monday.
ConsMin was the biggest shareholder in BC for the majority of its seven-year history, after it vended some Pilbara tenements into the company that listed on the ASX in late 2006.
BC's first days on the ASX saw the stock fetch about 24¢, meaning the value of ConsMin's stake had increased more than 18-fold by the time it hit this week's record high.
ConsMin has also received more than $12 million in dividend flows from BC in the past 13 months, due to the miner's strong performance and generous dividend policy.
The success of BC has vindicated ConsMin's decision to fight Hong Kong fund manager Regent Pacific when it tried to take over BC in 2011.
BC managing director Morgan Ball said the ease of the sell-down showed the high regard for BC.
"The fact Macquarie was able to get away a parcel of that size speaks wonders for us in terms of the institutional view of us," he said.
The exit inevitably raises the question of whether the peak of the BC Iron journey has now passed.
Mr Ball told shareholders there was a strong chance the 2014 financial year would be better for BC than 2013, given its joint venture with Fortescue would export 20 per cent more iron ore this year.
"We have de-risked the project and we are very comfortable that we will ship the full 6 million tonnes in full year 2014," he said.
The company can also afford to be optimistic about the iron ore price, given the average price for the first 68 days of the 2014 financial year has been $US132 per tonne; well above the $US116 per tonne average for that period last year.
BC is also conducting a trial to see if it can upgrade some of its lower-grade iron ore to a higher standard, in the hope it could increase the mine life.
Bell Potter analyst Fred Truong said he expected earnings growth from BC in the 2014 financial year. "The sell-down is a positive for the stock because it will increase the company's free-float and improve the stock's liquidity," he said.
Frequently Asked Questions about this Article…
ConsMin completed a $111 million sell-down of its BC Iron stake, exiting the stock roughly 30 months after winning control of the holding. The transaction delivered ConsMin more than a 16-fold return on its initial investment and was run via a Macquarie sale process.
The buyers have not been publicly identified, but BC Iron believes a mix of large institutional investors participated and paid about $3.90 per share through the Macquarie-managed sale process.
After the transaction BC Iron shares were trading around $4 (below a recent $4.50 record high). Analysts say the sell-down should increase the company’s free-float and improve stock liquidity, and BC’s managing director noted the ease of the sell-down as a sign of strong institutional regard for the company.
ConsMin exited with more than a 16-fold return on its initial investment. The company also received more than $12 million in dividend payments from BC Iron in the past 13 months, reflecting the miner’s strong performance and generous dividend policy.
BC Iron has a joint venture with Fortescue that is expected to increase exports by about 20% this year, and management said they are comfortable they will ship the full 6 million tonnes in the 2014 financial year, describing the project as de-risked.
BC noted the average iron ore price for the first 68 days of the 2014 financial year was about US$132 per tonne, up from US$116 per tonne for the same period last year. Bell Potter’s analyst also expects earnings growth for BC Iron in FY2014, which reflects the stronger price backdrop.
Yes — BC Iron is running a trial to see if it can upgrade some lower‑grade iron ore to a higher standard, with the hope that upgrading could increase the mine life.
The exit prompted questions about whether BC Iron has peaked, but management and analysts expressed optimism — citing higher shipments from the Fortescue JV, a de‑risked project, strong iron ore prices and expected earnings growth. Everyday investors should monitor production volumes, iron ore prices, the outcome of the upgrade trial and any changes to free‑float and liquidity.
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