Construction site
at Sundance’s Mbalam
iron ore project on the
Congo/Cameroon border
 
Sydney, Australia — 03 August 2012 – China’s Hanlong Group is in talks to reduce the US$1.8 billion price tag it agreed to pay for Australian iron ore miner Sundance Resources, following a drop in both Sundance’s share price and the price of iron ore.

Reuters quotes Sundance as saying in a statement issued here that Chinese regulators had finally approved the year-old deal, but on the condition that the purchase was struck at a “reasonable acquisition price.” Trading in Sundance shares, which have fallen 40% since the bid was first launched, was halted

Hanlong, which already owns 17% of Sundance, wants the company for its US$4.7 billion Mbalam iron ore project on the border of the republics of Congo and Cameroon, in central Africa. The region is seen as a major new source of iron ore that could cut China’s dependence on Australia and Brazil.

A Hanlong official told Reuters that the Chinese firm was seeking to negotiate a lower price, while Australian media reports indicated Hanlong was eyeing a deal at 50 cents, valuing the offer at US$1.6 billion.

“The power is with the buyer now with weak commodity prices,” said RBS Morgans senior analyst James Wilson. “Having said that, there have been M&A deals in the sector and mining majors are saying long-term demand outlook is positive.”

Last week rival Northern Iron Limited said it had two competing offers of over US$500 million each sending its shares higher.

The Sundance deal was agreed last year when the outlook for iron ore prices were far rosier. Iron ore prices are now languishing near their lowest level in more than two-and-a-half years, hitting the share prices of resource firms.

Other conditions laid down by China’s National Development and Reform Commission include Hanlong tying up equity and debt funding for the deal. The Chinese firm has till the end of August to secure funding from China Development Bank.

Reuters Africa. For more information, click here.