Mitsubishi to Buy Murchison Joint Ventures for A$325 Million

Mitsubishi Corp. will pay partner Murchison Metals Ltd. (MMX) A$325 million ($315 million) in cash for stakes in two ventures, giving Japan’s largest trader control of an iron ore mine and a rail and port project in Australia.

Mitsubishi indicated it will seek talks with potential new venture partners, including Chinese groups, to help build the A$5.94 billion Oakajee port and rail project, Murchison Managing Director Greg Martin said on a conference call. Posco may study investing in the iron ore operations, the South Korean steelmaker said in an e-mailed statement.

The deal implies a value of 51 cents for each Murchison share, 85 percent more than its close on Nov. 18, the Perth- based company said today in a statement. Murchison holds a half stake in Oakajee and in Crosslands Resources Ltd., owner of the planned A$3.7 billion Jack Hills iron ore mine expansion project.

Acquiring the stakes will increase Mitsubishi’s exposure to surging iron ore demand, with consumption in China, the biggest buyer, forecast by Rio Tinto Group to double by 2020 from 2008 levels. Murchison said in September it was revising plans for Oakajee, designed to open Western Australia’s Mid-West region for iron ore exports to Asia, after failing to get funding.

Mitsubishi’s taking full ownership of the Oakajee development removed the “funding uncertainty,” Martin said. Murchison produces ore from the existing mine at Jack Hills.

Murchison shareholders, including Posco, are expected to vote on the deal by February, the Australian company said.

Shares Surge

Murchison rose 53 percent to 42 Australian cents at the close of trading in Sydney trading, the highest since Sept. 22. Mitsubishi fell 2.9 percent in Tokyo trading, while Posco (005490) gained 1.4 percent. The South Korean steelmaker is Murchison’s largest shareholder, according to data compiled by Bloomberg.

“Mitsubishi has put forward an offer that represents a good financial result for Murchison shareholders,” Martin said in the statement. “We will also continue to pursue discussions with other parties to give shareholders comfort this is the best option available.”

Oakajee port in August last year signed initial agreements with potential customers including Karara Mining Ltd., a venture between Gindalbie Metals Ltd. (GBG) and China’s Anshan Iron & Steel Group and Sinosteel Midwest.

“Mitsubishi’s purchase of the stake is a great result for the Oakajee project and for the Mid-West iron ore industry,” Gindalbie Chairman George Jones said today in an interview in Geraldton, Western Australia. “It would make sense for a Chinese state-owned steelmaker to buy half of Mitsubishi’s stake. That would help guarantee the Oakajee project’s future.”

The Western Australian government in 2008 chose Murchison and Mitsubishi as developers instead of a Chinese group. At the time, Oakajee was estimated to cost A$3 billion.

To contact the reporters on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net; Jason Scott in Perth at jscott14@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net.

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