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Believe it or not, there’s more happening on the market today than the overnight DeepSeek scare on Wall Street.
Back home, Fortescue Metals (ASX:FMG) has indicated it’s set to buy out ASX-listed Red Hawk Mining (ASX:RHK) for between $1.05/sh to $1,20/sh, conditions depending.
The news has been a boon for Red Hawk: up 45% this morning to $1.18/sh from around 80cps at close last week. Red Hawk’s major upward spike comes on the back of a BDO-issued report indicating the deal is good news for RHK shareholders.
They mightn’t have needed a report to figure that out. The stock, overnight, is now posting a +94% YoY return.
What FMG gets in return is the Blacksmith Iron Ore project in WA’s Pilbara – Red Hawk’s flagship project some 70km from hotspot Tom Price.
“Red Hawk is focused on ‘right-sizing’ the Blacksmith Project,” the company displays on its website landing page.
“We are able to draw on the extensive work completed for previous alternatives of the Project including State and Federal approvals, Native Title agreements, and over 200,000 metres of drilling.”
Clearly, shareholders think the FMG deal is a better bet. Not that the iron ore price has crashed – the fact it remains attached to US$100/tn at Singapore has surprised some, including myself, given China’s weak construction demand and the vortex lance issue. Iron ore uncertainty moving forward was highlighted by BDO in its target statement report.
Regardless of overhead commodity prices, however, mining remains particularly expensive for juniors and the pressures and risks of running a smaller operation continue to remain as true as ever.
(Consider, for instance, Red Hawk’s market cap after a 45% jump: just over $235M.)
Red Hawk has also been in a position where it needs to acquire rights to use the Utah Point export facility at Port Hedland, also noted by BDO. As well as the fact it only had $1.3M in cash.
In this latest M&A development amidst Aussie miners, it’s not hard to see who the vulture is.
FMG last traded at $18.81/sh.
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