Why Atlas Iron Ltd Jumped 22% Higher Today

At the time of writing, shares of Atlas Iron Ltd [ASX:AGO] are up by 22.22%, to 4.4 cents, in today’s trading.

Why did Atlas Iron shares jump so much?

Atlas Iron received a takeover offer from Hancock Prospecting Pty Limited today. Hancock offered 4.2 cents per share for the company. Hancock Prospecting is a leading Australian-owned mining and agricultural business, run by Executive Chairman Gina Rinehart and CEO Garry Korte.

What now for Atlas Iron Ltd?

There’s no other way to say it: Atlas Iron is locked in the middle of a bidding war.

Mineral Resources [ASX:MIN] lodged a takeover bid for Atlas Iron on 9 April, valuing the company at 3.02 cents per share. Fortescue Metals Group [ASX:FMG] then bought a major chunk in the company on 7 June.

It owns 19.99% of Atlas Iron, and doesn’t support the ‘cheap’ Mineral Resources bid.

Atlas Iron owns world-class iron ore mines; however it’s selling its product at a significant discount. The company locked-in product at ultra-low prices following the Global Financial Crisis (GFC) for roughly a decade. To make up for lost profit, Atlas is utilising its infrastructure and network to sell ‘processed’ lithium into the market, which it buys from Pilbara Minerals Ltd [ASX:PLS].

Atlas Iron has had a difficult past, given its leveraged balance sheet and high cost of production. But the company has advanced, despite all odds. It has optimised its iron ore production profile, which has increased cash flow and reduced balance sheet debt.

The company isn’t out of the woods yet…

But, we’re wondering: who will end up buying Atlas Iron, and at what price?

Jason Stevenson,
Resources Analyst, Markets & Money

PS: Interested in mining stocks? My free new investor report, ‘The Top 10 Mining Stocks for 2018’, does exactly what it says in the name. I look at 10 companies that could make you huge money this year, and beyond. To download that report free, go here.

 


Jason Stevenson is Markets & Money’s resource analyst. He shares over a decade’s worth of investing and trading experience across resource stocks and commodity futures and options. He originally studied accounting and finance at Curtin University, where he was awarded a first-class honours degree. His professional background stems across high-net-worth, top tier accounting (corporate finance, tax and auditing), and sell-side equities research. Before joining the team at Markets and Money, Jason worked at boutique firms which advised fund managers and high-net-worth clients on where to invest. Whether it’s gold, crude oil, copper or an obscure metal like vanadium, you can rely on an in-depth analysis in Markets and Money. Jason also brings you extensive macro, political and geopolitical analysis from around the world. He leaves no stone unturned when it comes to telling the truth. Jason is also the lead analyst of Gold Stock Trader, a premium service for investors serious about precious metal stocks. Websites and financial e-letters Jason writes for:


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