Billionaire prospector Mark Creasy walks away from deal with Chinese group

Australia’s foreign ownership watchdog failed to meet its own deadlines in a year-long delay assessing an iron ore deal.

CZR Resources has walked away from a deal to sell an iron ore project to Chinese investors. Picture: Rohan Kelly

A company controlled by billionaire prospector Mark Creasy has walked away from a deal to sell an iron ore project to Chinese interests after the bidder failed to secure a tick of approval from the Foreign Investment Review Board.

CZR Resources unveiled a deal to sell a project, which sits adjacent to Rio Tinto mines in WA’s Pilbara, to Miracle Iron Resources more than a year ago.

Perth-headquartered CZR blamed long delays with the FIRB approval process for ditching the $102m Miracle deal.

Mr Creasy and the CZR board, which includes his wife Annie Guo, are now backing an all-scrip takeover offer from ASX-listed iron ore producer Fenix Resources, which is led by former Wallaby John Welborn.

In another twist, the ASX has quizzed CZR on a sudden spike in its share price, which has jumped more than 45 per cent to 24c on Monday from 16.5c last Thursday.

Miracle Iron is closely linked to parent company Shenzhen Naao Jianglan Investment, which is the investment arm of Chinese conglomerate Xinjiang Jiangna Mining Corporation.

CZR said on Tuesday that Miracle had not secured FIRB approval and revealed that the Australia’s foreign ownership watchdog had requested multiple extensions in assessing the deal, and been unable to meet its own deadlines.

“Due to the ongoing uncertainty associated with FIRB approval and the transaction as a whole … CZR considers that it is no longer in the best interests of shareholders to continue with the transaction,” CZR told investors.

A freight train carrying iron ore travels along a rail track towards Port Hedland. Picture: Ian Waldie/Getty Images

Miracle had been chasing CZR’s stake in the Robe Mesa project that is slated to produce 3.5 million tonnes of iron ore a year over its first four years of operation, with potential for that to rise to 5 million tonnes based on access to export facilities.

Perth-headquartered Miracle is led by Frank Yin, who has a long track record of Sino-Australia ventures in the mining sector.

In its half year report released on Tuesday, CZR said Miracle received all Chinese government approvals for Robe Mesa acquisition and only FIRB approval stood in the way of the deal going ahead.

During the six months to December 31, Miracle received several requests from FIRB to extend the statutory deadline for its assessment.

FIRB then requested a further extension to the statutory deadline to February 28, which was approved by Miracle.

The Robe Mesa project sits next door to Rio Tinto’s Mesa F deposit and was considered a potential Rio target before the iron ore giant opted to focus on higher-grade deposits like Rhodes Ridge, where Japan’s Mitsui last week agreed to pay the descendants of WA iron ore pioneer Peter Wright about $8.4bn for a 40 per cent stake.

The Robe Mesa deposit is close to Rio’s Robe River joint venture operations with Mitsui (33 per cent) and Nippon Steel (14 per cent) that have been mining since the 1970s, with rail linking the mines to export facilities at Cape Lambert.

CZR has an 85 per cent interest in the Robe Mesa project. Mr Creasy owns the other 15 per cent in his own right.

Fenix has made an all scrip offer of 0.85 a share for every CZR share, with the offer increasing to 0.98 if it secures 75 per cent of the stock before March 21.

The Creasy Group, which owns more than 52 per cent of CZR, has indicated to Fenix that it will back the deal unless a better offer emerges.

CZR reported a first half net loss of almost $16m.

The company was forced to defend its disclosure standards in response to a series of questions from the ASX about a big jump in its share price on Monday.

In response, CZR revealed it had first been contacted by Fenix about a takeover bid on Christmas Eve and that the two companies had been in talks for weeks.

CZR said it only officially terminated the Miracle deal after receiving the ASX letter on Monday and subsequently announced the details to the market on Tuesday as the Fenix takeover offer was disclosed.

CZR said it had no reason to believe that confidential information had been leaked, and maintained it was in compliance with listing rules.

The Fenix offer values CZR at $71m at its undisturbed share price. Mr Creasy is set to emerge with a 12 per stake in Fenix, which has a solid track record in mining, hauling and shipping iron ore in relatively small volumes in WA’s Mid-West, if the deal goes ahead.

Mr Welborn said the spike in CZR share price late last week and on Monday was disappointing.

“We’ve been feverishly working on this deal. We move pretty quickly, and confidentiality and those things are always really important and something we really stress on our side,” he said. “I don’t know what happened yesterday, but obviously it was unusual volume and price action.”

Mr Welborn said Fenix intended to move quickly to bring Robe Mesa into production as it had with projects in the Mid-West.

“If CZR shareholders want to accept the bid and then hang on to our shares, I think we’ll demonstrate why the richest people and the largest companies in this country control iron ore,” he said.

Fenix plans to haul iron ore by truck about 200 kilometres to port facilities at Onslow using public highways and roads. The plan mirrors some aspects of what Mineral Resources has tried to do on a much larger scale using a private haul road.

Mr Welborn said he had no insight into Miracle’s problems with FIRB but noted: “Australian management teams have demonstrated we’re the best owners of these Australian iron ore projects and mineral projects generally.”

Originally published as Billionaire prospector Mark Creasy walks away from deal with Chinese group