Red Hawk Mining’s boss says Fortescue’s takeover bid is in shareholders’ interests

Red Hawk Mining managing director Steven Michael wants shareholders to accept Fortescue’s initial $1.05-per-share offer which will rise if it secures at least 75 per cent of the company.

Fortescue’s offer values Red Hawk Mining at $254m.

The boss of West Australian iron ore developer Red Hawk Mining has urged shareholders to back a $254m takeover offer from Fortescue, arguing the mining major is best placed to progress its Blacksmith project in the Pilbara as worries over Chinese demand and tariffs in the US escalate.

Fortescue is offering Red Hawk shareholders $1.05 per share as part of its off-market cash bid, increasing to $1.20 if it secures at least 75 per cent of Red Hawk shares within seven days.

At that price, the transaction values Red Hawk at $254m, representing a 46 per cent premium on its closing price on January 24 – the last day of trade before the deal was announced to the market on Tuesday.

Red Hawk managing director Steven Michael told The Australian that the offer represented an “attractive outcome” for shareholders, amid an uncertain outlook for Australia’s iron ore producers.

“From a Red Hawk shareholder point of view, it’s a very clear path to realising their return on their investment in a very short period of time,” he said.

“I think it is fair to say that the iron ore market, where we sit today at about $US104 a tonne – there is probably more risk to the downside than the upside.

“Things like Simandou on the horizon coming out of Guinea sometime this year may have an impact, obviously China has slowed down a little bit, and there’s always the risk of the new tariffs being imposed out of the US that may have an impact as well.

Red Hawk Mining managing director Steven Michael. Picture: Stewart Allen

“As a board we definitely looked at the outlook for iron ore, and as a single-asset junior company, overlay that outlook for iron ore to our ability to fund and to build and then to provide offtake on this project, it compounds that risk for a single-asset junior.”

As part of a pre-feasibility study released last year, Red Hawk was looking to invest close to $250m into the development of Blacksmith – a 243 million tonne resource measured at 59.3 per cent iron grade.

The project was designed to ramp up to more than five million tonnes in annual production over its more than 20 years of life.

However, with the project located just 30km west of Fortescue’s Solomon iron ore operations, there is an opportunity for Fortescue to integrate a much larger project into its existing operations, which provide a direct rail link to Port Hedland.

“For a company of our size, funding a project at $250m, or possibly more, would be a challenge,” Mr Michael said.

“In the hands of Fortescue, if they end up with control of this project, they would look to integrate it straight into their existing infrastructure.

“They would, I’m assuming, look at the scale of this project very differently to how we were going to look at it based on a smaller scale truck-to-port operation.”

Red Hawk’s directors have unanimously endorsed the bid, including representatives from the company’s two largest shareholders – New Zealand’s Todd family through its TIO (NZ) subsidiary and OCJ Investment (Australia), who together control more than 80 per cent of the company’s shares.

Fortescue said its offer represented a “significant and attractive premium” for Red Hawk shareholders.

“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,” Fortescue said.

Previously known as Flinders Mines, Red Hawk was rebadged in 2023 after abandoning plans for a multibillion-dollar iron ore and infrastructure project in WA, including a new rail corridor and a deepwater port at Balla Balla, south of Port Hedland.

Fortescue’s offer closes on March 3.

Red Hawk shares closed 44.5 per cent higher on Tuesday at $1.19. Fortescue closed 0.4 per cent higher at $18.88.

Originally published as Red Hawk Mining’s boss says Fortescue’s takeover bid is in shareholders’ interests