Fortescue has announced it has entered into an agreement for the acquisition of Red Hawk Mining, the owner of the undeveloped Blacksmith iron ore project in Western Australia.
Blacksmith lies just 60km north of Rio Tinto’s Tom Price and 30km west of Fortescue’s Solomon iron ore project, which is one half of the Western Hub operation that boasts a yearly output of more than 100 million tonnes of iron ore.
The total Blacksmith mineral resource estimate is 243 million tonnes at 59.3 per cent iron grade.
Fortescue will pay $254 million for Red Hawk if it can complete the deal by next Monday, marking a 48 per cent premium to Red Hawk’s 30-day volume weighted average price to January 24 2025.
“The offer represents a significant and attractive premium to the market value of Red Hawk,” Fortescue said.
“The cash consideration under the offer delivers immediate value to Red Hawk shareholders and provides certainty, noting the significant risks to the development of greenfield iron ore projects.”
If Red Hawk fails to accept the offer within seven days, then the offer will reduce to a 29 per cent premium on the company’s closing share price on January 24, which was $0.82.
This means Red Hawk shareholders will receive a cash amount of $1.05 per share or $1.20 cash per share if the increased offer condition is met.
The Red Hawk board has unanimously recommended the company’s shareholders accept the increased Fortescue offer.
“Whilst we firmly believe that the Blacksmith project has the potential to be a major iron ore project, there is significant cost, time and risk associated with developing a project of this scale, particularly in the context of an uncertain broader global economic outlook,” Red Hawk chair Cheryl Edwardes said.
“As such, the board believes that the offer provides shareholders with a compelling opportunity to de-risk their investment and realise certain value at an attractive premium to historical trading levels leading into the announcement of the offer.”
Fortescue is in the process of increasing its iron ore stronghold in WA and has made moves to cast its net even wider with a recent deal to enter the downstream processing market with China’s Baowu Resources.
The world’s fourth-largest miner also celebrated its highest half-yearly shipments in Fortescue history last week with the announcement of a record 97.1Mt in the six months to December 31 2024.
