Found this over on the CHM thread. I'm surprised noone put it over here on MMX, so here's a read for anyone left alive. I cannot see MMX distributing proceeds from any future sale to members, and how much would it be anyway once debts have been covered - 20 to 25 cents per share ? and what's left as MMX assets after a distribution - JP Morgan are being a bit optimistic, IMHO, unless they mean MMX will be wound-up.
After Murchison Metals’ 53% surge on Thursday after joint venture partner Mitsubishi offered 325 million Australian dollars (US$316 million) for its 50% share in the Oakajee Port and Rail project and 50% share in the Jack Hills iron ore mine, some brokers believe its time to get out.
CLSA Asia Pacific, who have a “sell” call on the stock and a price target of 25 cents, believe a higher counter offer from other Chinese steel companies that operate in that region — Ansteel and Sinosteel — is unlikely.
“Whether the Chinese purchase Murchison’s share of Jack Hills and the OPR or not, they still have to negotiate with Mitsubishi regarding development plans, timetables, funding and tariff structures,” said CLSA analyst Michael Evans in a note. “At least if Mitsubishi moves to full ownership of Jack Hills and the OPR, the Chinese interests in the region can negotiate with one party rather than a more complicated Murchison/Mitsubishi joint venture.”
Mr. Evans said downside risks to the deal exists in the form of approval from the government’s Foreign Investment Review Board and Murchison’s legal dispute with Chameleon Resources.
Deal Journal Australia thinks Chameleon could emerge the biggest winner.
Chameleon, a company whose main activity in recent years has been pursuing a drawn-out legal action against Murchison, claims it is entitled to a share in the Jack Hills and Weld Range mines due to a series of transactions in the early 2000s.
Last October, an Australian court dismissed the core of the claim first lodged in 2007 but added that Murchison should pay Chameleon a pretty nugatory A$430,590 plus six years’ of interest. Chameleon appealed that decision, and the judgment is due in the first three months of next year.
However, that won’t work with the timetable for the Murchison-Mitsubishi deal, which hopes to be completed by mid-February. Under the terms of the agreement published Thursday, the transaction can be terminated if Murchison cannot settle Chameleon’s claim by 23 December, with an upper limit of A$25 million placed on the value of any settlement.
That puts Chameleon’s lawyers in a strong bargaining position. Everyone knows that Murchison is desperate to extract some value from the deal. Shareholders who have stuck with them this far would be extremely disappointed to have the whole thing fall apart over the price paid to buy off this long-standing irritant. Chameleon, with a market capitalization of just A$11.6 million, could be in for a decent payday.
Separately, JPMorgan analyst Mark Busuttil — who upgraded Murchison to neutral from underweight — reckons there will be widespread support for the full distribution of net proceeds to the shareholders if the deal closes. Citi analyst Clarke Wilkins pointed out Mitsubishi is on an “M&A spree”, having already spent around A$1 billion to acquire the minorities in Coal & Allied and another US$5.4 billion to acquire Anglo American’s 24.5% stake in Anglo American Sur.
MMX Price at posting:
39.0¢ Sentiment: None Disclosure: Not Held
