GBG - Gindalbie Metals

Based on the report produced by Southern Cross Equities, on 1 August, a 10% increase in average price for the FY 2010 will produce approximately 30% increase in profit for the same period. But we do need to be quite cautious in drawing too many long-term conclusions from this. Sales contracts will probably be written in $US, so it is important to factor in your own guess as to the exchange rate which will apply at that time. In addition, the SC cost assumptions are predicated on a base case of only 12 Mtpa. Production at significantly higher rates, which now is looking increasingly likely, could result in further economies of scale.

As for the impact on the share price - I guess the more blue sky people can see, the more excited the optimists (like me) become. I will be more than happy with a price of $2 by year-end.

Cheers, Serendip

Mention article in previous post, good read below.

Miners to throw down the gauntlet on iron ore price

September 22, 2007

BOOMING iron ore miners are set for another bitter clash with their Asian customers over who should pocket the billions of dollars in transport savings that stem from Australia's close proximity to the region.

Australian ore lands on Chinese and Japanese wharves about 40 per cent cent cheaper than competing ore from Brazil due to sharply lower shipping costs, but BHP Billiton and Rio Tinto have never managed to convince the steel mills that the lucrative savings should flow to the miners. Instead, iron ore wholesalers and mills in Asia have reaped the vast extra profits.

But booming demand for iron ore, which is expected to lead to prices rises of at least 25 per cent and possibly as much as 50 per cent in the coming round of annual talks, has given BHP and Rio unprecedented negotiating strength to push their case that they are entitled to a big slice of the transport savings.

BHP raised the highly sensitive issue in annual price talks with its Chinese customers in early 2005, sparking a war of words with Chinese officials.

The fight ended in humiliation for BHP when it unsuccessfully pursued the matter alone, long after Rio and other iron ore miners had agreed to an already huge 71.5 per cent price increase for the year.

Australian producers currently receive around $US50 per tonne for Pilbara ore, which ultimately costs Chinese customers around $US75/t after paying for shipping costs. In comparison, Chinese buyers pay up to $US125/t for contracted deliveries from Brazil, and are now paying as much as $US165/t for lower-quality Indian ore bought on the more volatile spot market.

Even if Australian miners pocketed the entire $US25/t "differential", Chinese customers would still save $US50/t by buying Australian ore.

The annual price talks, which start informally next month, are highly sensitive and neither BHP nor Rio would comment yesterday. But one senior market source said there was little doubt that Rio would fall into line on the issue this year, noting that new Rio boss Tom Albanese had adopted a "watch this space" attitude when the issue was raised during analyst briefings last month.

"The gap is a lot wider now than it was then … so I suspect Rio don't mind the issue being there on the table," the source said.

Fortescue Metals Group, which will become Australia's number three ore exporter when it starts production in May, declined to buy into the pricing debate yesterday.

Operations director Graeme Rowley said the company would not be involved in the coming talks and would accept whatever price outcome was negotiated.

24/09/2007 Trading Halt
http://www.asx.com.au/asx/statistics/showAnnouncementPDF.do?idsID=00761842

Placed in pre-open pending ann otherwise open on Wednesday

Any hints?

Interesting ............both GBG and SDL are in trading halt .......exactly the same until announcement or Wed morning ........both requests submitted within a minute of each other to ASX.
What do others read into this, if anything?

AussiePaul72 said:

Interesting ............both GBG and SDL are in trading halt .......exactly the same until announcement or Wed morning ........both requests submitted within a minute of each other to ASX.
What do others read into this, if anything?

Click to expand...

Im thinking they probably merge. Both in trading halt at the same time so must be something like that.

AussiePaul72 said:

Interesting ............both GBG and SDL are in trading halt .......exactly the same until announcement or Wed morning ........both requests submitted within a minute of each other to ASX.
What do others read into this, if anything?

Click to expand...

AP72,
Interesting ............both GBG and SDL are in trading halt .......exactly the same until announcement or Wed morning

Where and how does SDL fit in with GBG?

The SDL request suggests they will make an announcement prior to close of trade today.

The Lodestone announcement can not be far off for GBG.

Could it simply be a coincidence?

What are the possible benefits of a merger for either company?

cheers
Surly

Surly said:

Could it simply be a coincidence?

Click to expand...

Quite likely, I think it's unrelated.

As you said GBG is due for drilling results from the Lodestone Project or it could also be related to the Yilgarn Infrastructure Project (see MIS ann).

SDL is also due for it's first drilling results that they started back at the end of June.

so i think this is related between SDL and GBG

a potential merger would create quite a large iron ore company, if we think of potential for both companies we have:

GBG potential 3 billion tonne magnetite resource covering lodestone and karara. potential 100 million tonnes of direct shipping ore.

SDL potential 1 billion tonnes of hematite.

so far these resources are been upgraded and expanded with delineation, but we could see both companies shore up some major deposits there.

i think the potential merger would be a win/win situation for both companies. it would place it in the esteem of FMG, BHP and RIO in a competitor sense anyway.

Re-open at 1.45pm. Merging on the way. Hope this is good for both GBG and SDL. Lets sit and watch how this pans out.

Wait sorry guys,

Ive never been involved in a merger. So i got SDL shares right, now that the merger has been signed i get 35% app. of GBG shares however both SDL and GBG stay on the market?

If they merge shouldnt they be trading under one name? or are they gonna keep the share prices separate...

Djayness said:

Wait sorry guys,

Ive never been involved in a merger. So i got SDL shares right, now that the merger has been signed i get 35% app. of GBG shares however both SDL and GBG stay on the market?

If they merge shouldnt they be trading under one name? or are they gonna keep the share prices separate...

Click to expand...

You will receive one GBG share for each 2 SDL shares you hold. GBG will aquire the complete share holdings of SDL and it will trade under a single entity being GBG.

Great outcome for both organisations.

Sundance are at 0.82 cents. Will this mean that Gindalbie will pick up these shares at this price or is it at the closing of 21st September?

GBG and SDL are now trading

BG $1.65 -$0.05 -2.94% 796,479 shares $1,318,366 @ 24-Sep 14:06:42

SDL 0.805 0.065 8.78% 10,415,662 shares $8,550,102 @ 24-Sep 02:08:01 PM

24/09/2007 Gindalbie and Sundance Proposed Merger
http://www.asx.com.au/asx/statistics/showAnnouncementPDF.do?idsID=00761980

24 September 2007
GINDALBIE AND SUNDANCE ANNOUNCE PROPOSED MERGER TO CREATE A SIGNIFICANT NEW IRON ORE GROUP

Iron ore companies Gindalbie Metals Ltd (ASX: GBG – “Gindalbie”) and Sundance Resources Limited (ASX: SDL – “Sundance”) today announced that they have reached agreement to merge to create a substantial A$2.4 billion international iron ore company. The companies have executed a Merger Implementation Agreement (“MIA”) to effect the merger by way of a Scheme of Arrangement (“Scheme”) under which Gindalbie will make offers to acquire all of the issued securities in Sundance.

The proposed merger will result in the establishment of a major independent Australian-based iron ore company with a diversified asset base comprising world-class iron ore projects in Western Australia and West Africa, a very significant production growth profile and a global presence.

Details of the Agreement and Offer
Under the terms of the proposed Scheme of Arrangement, Sundance shareholders will receive one (1) Gindalbie share for every two (2) Sundance shares they hold. Based on the closing price of Gindalbie shares on 21 September 2007 of $1.70, the offer values Sundance at approximately A$1.6 billion and represents a premium of 14.9% on the closing price of Sundance shares on 21 September 2007 of 74 cents, and a 34.5% premium to the 30-day volume weighted average price (VWAP) of Sundance
shares.

On completion of the merger, the new entity would have approximately 1.43 billion shares on issue with an estimated market capitalization of approximately A$2.4 billion based on the closing price of Gindalbie shares on 21 September of $1.70. Gindalbie securityholders would hold approximately 35% and Sundance securityholders approximately 65% of the merged company.

Can someone explain to me why the price of GBG would be falling whilst SDL is rising? It doesnt make sense to me why people would want to sell up in such a fantastic merger....

greenfs said:

I think that I remember reading somewhere that the chairman for GBG is also chairman for SDL. Does this create potential that the companies might be talking about a merger given the asset classes are very similar?

Were we not supposed to hear by now about the outcome of talks GBG was having with a third party?

Click to expand...

I am waiting for the plaudits of other subscribers for this post made only a week or so ago. Sometimes 1+1=2.

Djayness said:

Can someone explain to me why the price of GBG would be falling whilst SDL is rising? It doesnt make sense to me why people would want to sell up in such a fantastic merger....

Click to expand...

SDL shareholders get 1 GBG share for each 2 SDL shares they own. That means that they get a premium for their GBG share. Whereas GBG lose the premium. In the short term it will affect GBG negatively. In the long term it is a positive.

SDL was a speculative stock until yesterday. this merger confirms its potential more than anything else. the biggest risk for GBG shareholders is that SDL's main asset proves to be a dud. personally, i am satisfied with the way the management of SDL has managed to sell this deal to gbg in which case it confirms its potential to produce as much quality grade FE as FMG and MGX. This is huge for GBG. It allows GBG to produce and sell FE of much higher quality and less cost that it could do based on its own assets.

actually, more than anything else, i think this deal potentially stops the speedy growth of value in SDL shares??? I have to admit George is a genuis.

Where is the premium for SDL holders?? GBG closed today at 1.365 whereas SDL closed at 0.805. I am expecting SDL to keep going up and GBG to stagnate that leaves very little premium available for 1 GBG vs 2 SDL deal.
I can't see why this deal is of interest to shareholders?
Just my opinion.

greenfs said:

I am waiting for the plaudits of other subscribers for this post made only a week or so ago. Sometimes 1+1=2.

Click to expand...

greenfs,
You're posting quotes that you made yourself.
It's a worry.
Were you hoping for "You're a genius" and just couldn't wait any longer?


P.S. GBG has been a great stock, looking forward to it continuing.